Trader Education

Trader Education

Does a trader need education ?

For Forex, some education is probably required, because it is a market which needs understanding simply to make a trade.

What can be done to get information to help with trading ?

It is possible to take a course. But it is also possible to educate oneself, without taking a course. The advantage of doing this oneself is that it may be a less expensive route. To do this, books can be read and videos and webinars can be watched.

Webinars can be a good way to get the kind of information which is out there but not necessarily disseminated. They can also be grounded in market action, for example a live webinar around a news event.

However, unless the trader chooses to copy trades, then decisions have to be made by the trader on their own. Even in copy trading, it may be useful to have the network inform trading decisions, rather than make them. Perhaps the key element of trading is dealing with decision making in a market which can rapidly invalidate any decision or analysis.

Can books really help ?

When I was programming, I knew two languages, LISP and Prolog and I learnt them in a formal way. But to start a project, I had to learn a language called 'C', quickly. To do this I read a key book on 'C' over the weekend and then started programming during the week and it worked.

But this worked partly because I knew LISP and Prolog. When I began trading, before I did anything I read as much as I could (i.e. I tried to replicate what had worked for me with programming, to the extent this was possible).

Forex is hard, and even the mechanics of the market can be difficult at first, like placing a trade, working out leverage and so on. But when I opened my first Forex broker account I did not feel lost. I did make myself use a demo account first, before switching to the live account.

What are good books to read ?

For Forex, it is helpful to read books about technical analysis, particularly books on
candlestick charts and patterns. Candlestick charts are helpful to illuminate the complex moves Forex makes respecting and disrespecting support and resistance and technical levels. Patterns appear on the charts. So any self directed course which is built around candlestick charts and patterns may be helpful.

Also, it can be helpful to have as in depth an understanding as possible of technical indicators such as MACD, RSI and ADX. In Forex moving averages can be important, and they can show why a pair is moving they way it is moving.

This does not mean that indicators will help with successful outcomes in trades, but it does mean that one can understand what they do and what they might indicate. But no indicator can be depended on, they are at best just indicating possible outcomes.

It is also be helpful for the trader to educate themselves about other markets. Changes in Indices can have apparent effects in Forex markets. Indices are made up of individual stocks. While this may not help at all with a Forex trade, it can help one understand the context within which Forex events happen. It gives a grounded detailed sense of fundamentals which can directly affect the Forex market.

So reading about the stock market, about stock analysis, for example how to understand a financial statement, can be a way to deal with the information overload and underload that the markets present.

What about continuing education ?

Forex can be exciting and compelling, thus reading can become a pleasure in and of itself. After trading for a while, this may become the primary motivation, and if trading goes wrong, the temptation can be to give it all up, including education.

However, while stopping trading can be a good idea, it may be an even better idea to continue reading and re-reading in these breaks. Experience from trading can then illuminate something things might have been read previously.

It becomes a virtuous circle, then, bringing this increased understanding back into the market when trading again. Knowledge can at least show why things happened. Explaining though how a trade when wrong, could perhaps easily have been explaining how a trade went right.

Education in trading may not be like education in programming or engineering. The underlying market has a complexity and lack of certainty which makes for any application of past events or constructing causal models very problematic. By learning much, one may be learning little. However it is probably unquestionably better to be able to give some explanation for what has happened and to be able to make some reading of the market. At the very least this provides a way of reading the market, and seeing where problems may develop. At best it can provide confidence to make trades based on analysis with signals suggesting when to enter and exit. This kind of rigour can help when trading faster markets such as news trading or shorter term trades.