Forex trading for beginners: How I supplemented my income in 12 months
You can supplement your income by part-time forex trading.
Many people try to balance their careers with foreign exchange (aka forex) trading on the side. However, due to myths about forex, they perceive it as difficult or impossible to do. Well, I’m someone that had the thought, tried it, and succeeded.
I will share my journey into supplementing my income with forex trading and how I did it in 12 months.
Getting Started: Forex Trading for Beginners
Months 1 to 2
In the first months, you should start laying out how much time you might have to spare. Your existing work might already be taking up a ton of your time, so you need to know how much you can spare for your study.
After I signed up for a course about forex, I analyzed how much time I could spare for studying without harming my work and social life. You need to be very careful with how you balance your life. Do not spend so much time studying forex that you get fired. Without a job, where will you find your investment capital? Similarly, remember to have a social life. Otherwise, you might end up with lots of cash but nobody to enjoy it with.
I used to work from 9 am to 5 pm. (Damn! It sounds a lot now that I barely sit to work for 5 hours a day.) We had a 30-minute break at 11 am, an hour for lunch, and another 30 minutes at 3:30 pm. These breaks are what I planned to use for studying forex during my workday.
I also had a 7-hour window from the time I got home to when I settled into bed. This was enough time to spend an hour with some close people, make dinner, watch a program, and study some forex.
The other spare time that I had was the weekends. Luckily, I did not work all weekend. I made Saturday my main day of planning, studying, and polishing all that I read through the week. After I was done studying, this was the day that I did the chart analysis to guide me through the following week. My Sundays were for friends, family, gardening and anything else, but not forex!
Now, with my spare time highlighted, I came up with a personal timetable. I looked at my course and saw how much time was needed for each lesson. I found out that it would take me 2 months to finish the course.
Depending on your schedule, you might take shorter or longer to finish your forex studies. However, you should be more than comfortable if you can have a schedule similar to mine.
The Trading Journal
Yes, as a trader, you must keep a trading journal! A busy adult knows how easy it is to forget the most critical information. To minimize this risk, keep a trading journal alongside your personal diary.
Every day, make sure to record details such as:
- Did I cover the expected study materials per the timetable?
- If not, when can I squeeze in some more time to compensate?
- What did I learn today? Did I understand it? What did I fail to understand so I can do some more research or ask an expert?
- Am I meeting my short-term goals of adhering to the schedule?
- How did the lesson feel? Am I enjoying my studies?
Write anything that you feel will help you to keep track of your vision.
Further into your study, you will have slightly different uses for the trading journal.
Thanks to an amazing mentor, I also understood that demo (practice) trading is mandatory if you are serious about making profits from trading. This was kind of intimidating. I felt like I’d finished my study, why couldn’t I just go straight to making money.
Months 3 to 5
Trust me, if it was not for my mentor, I would have quit my job way too early. However things in the actual trading grounds are quite different than they are on paper. In the real market, you need to get used to scary things such as making wrong analyses, risking more than necessary, dealing with unexpected market movements, uncertain trading times, and so on.
This is why you need to demo trade, or a test trading account that has virtual funds. The account works like a real account would, only that you do not make or lose real money. Make sure to sign up with a broker that offers you a demo trading account such as Mitrade.
It took me approximately three months to get used to playing around with my trading platform, applying my lessons in actual trading, understanding money management, and so on. I used the same timeline to do my demo trading and found that it was a more enjoyable way to study than reading.
Here’s the routine I used to practice forex trading:
- Early mornings, evenings, and Saturdays: Deep analysis to reveal potential money moves. This is because I had a lot of time to spare and so I could concentrate without distractions or rushing.
- Workplace breaks: Waiting for trade entries, entering and exiting trades. These activities require less time as long as my plans were organized h. All I had to do was to peep into my charts a few times during the day. Entering, exiting or managing a trade takes only a few seconds.
In a nutshell, by the end of my demo period, I could trade on my own. I knew what to do, what to avoid and, most importantly, I came up with a trading system that made me some profits.
By month six, I was done with my demo and was sure that I could trade and make profits without fear or over excitement. My mentor let me start and I felt like a small kid that had been left by his parents in the middle of a jungle infested with tigers and lions. In fact, that is what the forex market is; you either outsmart other traders and take their money or they will take yours!
Going live is the best but also the scariest part of the trading journey. It is the last stop before you either fail or succeed.
Here are some deciding factors that I kept in mind when I reached this crucial step of supplementing my income:
1. How much was my salary?
My salary was about $1,000 at the time. I needed to set a target dollar amount at which I could consider the journey a success. Personally, I wanted to make at least the same amount from my trading every month.
This would be enough consolation in the event that I quit my job or I got fired. At least my life would remain the same!
You can set any target that satisfies the goal or life change you’d like to see.
2. How would I earn the target?
Next, I knew that to make an amount similar to my salary, I had to earn at least a quarter of my monthly salary every week.
As I would later learn, setting such a target can be unrealistic in forex trading. This is because the market might give you more or less than you expected. At times, you’ll earn nothing or even lose money—and that’s just part of the industry!
My first month of live trading was hectic because I barely made 10% of my salary. Feeling disappointed, I consulted my mentor and he gave me some very helpful tips:
- When starting out, concentrate on identifying high-probability setups and not profits.
- Make proper use of leverage and lot size. If you use too much of these, you risk blowing your account. Similarly, if you squeeze them too much, then you might end up making too little.
- Always stick to money management. This protects your account from excess risk and also ensures that you are growing. In short, you make more than you lose.
Lessons on Leverage and Lot Size
The biggest lesson of my forex trading life came during months seven and eight. My mentor taught me the secret of “Pips First, Money Later.” In this approach, you work on making as many pips as possible then converting them to money later.
Here’s what that means:
I funded my account with $200. The account was supposed to have a leverage of 1:100 and all my trades were to be taken using lot size 0.01. What that means is that if I took a trade using lot 0.01, I would make $1 for every 10 pips of profit. I would also lose $1 for every 10 pips lost. With this, I would have to make a loss of over 2,000 pips to blow the account. This is impossible if a trader adheres to the rules of proper money management.
For the next two months, I concentrated on making as many pips as I could following the Risk to Reward Ratio approach. In it, you risk less than what you stand to gain. In the long run, you end up remaining profitable even if your losing trades are more than the profitable ones.
The income was minimal, but I was happy with the number of pips that I accumulated.
In month nine, my mentor and I were both happy with my progress. I was averaging at least 50 pips of profit every week. They might sound too little, but any experienced trader will confess how hard it can be to make an assured 20 pips a week. We did some auditing and found that in some weeks, I made over 100 pips, and, on some, I made as little as 10 pips. On my worst week, I lost 20 pips in total. However, collectively, the wins overshadowed the losses and I always had 200 pips of profit in each of the two month period.
So, what did that amount to?
I earned $1 for every 10 pips that I made. So, from my 200 pips, I had made just $20 every month. In other words:
- I had made 20% of my invested capital in the 2 months ($40)
- I had made a 10% return on investment every month ($20)
- I would need to trade for 10 months to double my account
In my mentor’s words, I had “attained the status of the successful trader.” When I asked why, he said that the return on investment (ROI) was safe and sensible. I had not risked too little or too much.
Here comes the trick:
With $200, using lot 0.01, and making 200 pips a month, I had earned $20 on average every month.
What would happen if I used a lot size that is 10x bigger (lot 0.1)?
If this happened, I would be earning $10 from every 10 pips of profit. Therefore, my 200 pips would be giving me $200. The ROI would still be 10% per month. However, I would need a larger investment of at least $2,000.
So, what happens if I used lot 0.5? I would be making $50 from every 10 pips. As such, my 200 pips a month would be giving me $1,000. Voila! I would have my salary already! However, I would also need an even bigger deposited capital of at least $5,000.
I decided to bring my investment to $5,000.
Supplementing My Salary, Finally!
Months 9 through 12
When studying forex, you will come across one lesson that talks about trading psychology, and you will see how emotions can make or break a trader. I experienced this when I deposited $2,000 into my account.
From my calculations, I decided that I could comfortably trade using lot 0.2. This would give me $400 every month from my 200 pips. Trust me; it took me a whole week of convincing myself to pull the trigger with such a “huge” lot size. However, with my mentor’s assurance, I was able to trade with the same lot for the other three weeks.
To say the least: I made my first ever $600 from forex trading.
Over the next three months, I topped up my account with $1,000. In month 11, I was trading with a $4,000 account and made my $800 comfortably. Experience pays when it comes to forex trading.
By the time I made my final $1,000 deposit to bring my deposit above $5,000, I was very confident with my strategy. I made losses, but I knew the profits would come and cover me; and they did!
My trading schedule
On weekends, early mornings and in the evenings, I would sit at my trading desk and analyze the charts. I would then note down the best potential setups and keep watching them when I was working. If your broker supports mobile trading, you can also watch your setups unfold from anywhere at any time. When the final week of my twelfth month came, I had made an incredible $958, just $50 short of my salary!
One year down the line, forex had become my main career and my day job was my side hustle. This is when I finally resigned from work to focus on forex full-time.
Best Part-Time Trading Strategies
If you are looking to add income on top of your career, current work situation, or maybe even while you’re in school. There are several options that you can use to do part-time trading. At the end of the day, several factors such as the nature of your work, the available time, and your preferences determine which one is best for you.
Swing trading, the method I used, means that you use the higher time frames to conduct market analysis and take long-term trades. I did this during the mornings and evenings as well as on Saturdays. This is an alternative to day trading, or scalping, which requires you to be in front of your desk all day hunting and waiting for setups. If I had done that, I would have probably been caught and fired.
Instead, I used the daily and weekly time frames to analyze the market. From this, I would need to check the 4-hour timeframe for my trade entries and exits. Therefore, I had an alarm set each time a 4-hour candle closed. In this way, I only checked my phone twice when at work and twice when off work (four times a day).
In addition, swing trading allowed me to hold my trades for days without checking them every minute or hour.
With this method of trading, you do not need to go through the learning and practicing curve. Rather, you only need to find a profitable trader who allows other trades to copy his trades. They usually charge a fee for this.
What happens is that your trading accounts are linked. So, when he makes a trade, it will also be executed on your trading platform. All you have to do is pay them the agreed fee. Then you can collect your profits when you want.
This approach is best for people that have little or no time to study or trade on their own. The only downside is that the other party is fully in control of your success as a trader.
Are you aware that there are programs known as robots or Expert Advisors (EAs) that can automatically trade on your behalf?
Today, thanks to programming and coding, traders can instruct the robots on conducting market analysis, executing trades, managing trades and closing them.
Once you have a profitable strategy, you can have it coded into an EA.
Alternatively, you can peruse the web for a profitable EA and purchase it. However, this is not a recommended approach since robots cannot make the same crucial decisions you can. In addition, very few of them are profitable.
The final way that you can supplement your salary through trading is by investing with a profitable trader or hedging fund.
It’s pretty common to find people who deposit money into their accounts and let other people trade for them. Others give the money directly to the hedge funds or traders and then they receive an agreed ROI after a specified time.
This method is also best for people who might have funds to invest but they lack the time to study or trade on their own.
Also, it is important to conduct proper research on a hedge fund or third-party trader before investing with them to avoid being scammed.
You can supplement your income through part-time forex trading.
If my experience is anything to go by, you actually supplement your income through part-time forex trading in less than 12 months since you already have the steps laid out for you. Just be sure to find a good course, a worthy mentor, and plan your time well.
If you want to generate income from trading but you lack the time to do it yourself, then other options exist. You can use automation, opt for copy trading, or invest with a third-party to trade on your behalf.
Whatever the case, let nothing stop you from making that coin on the side through forex trading. It is possible!
Have you tried any of these forex trading strategies? Which one is your go-to method of making money on the side?