A competent teacher can determine your future in trading. You should be serious about choosing a mentor. Earlier we discussed the qualities of a good tutor. It’s time to find out how to determine the level of a mentor in front of you and whether he or she will suit you personally.
What Is Your Trading Experience?
Most of the skills and knowledge the trader gains through experience and it takes a lot of time. The first thing you should ask is how much time the mentor spent on Forex. Remember, however, that the more experienced the mentor, the more money he can request for the services. Still, it is better to fork out once than to get stuck with an inexperienced trader and find that he is not able to give you the required knowledge.
How Much Can I Earn on Forex?
This question will help you weed out real mentors from cheaters who just want to make money on you. If the teacher promises you piles of profit then you should immediately switch to another option.
What Is Your Trading Plan?
Most mentors teach the same strategy they use themselves. They’ve already mastered it and know it like the back of their hand. Of course, all the secrets will not be revealed to you for free but the mentor should tell you about the basic indicators:
- The main methods of analysis
- Enter and exit terms for a trade
- Which indicators he uses, etc.
You must make sure that the mentor has a clear plan that he follows so that he can teach you to do the same.
What Is Your Risk Management System?
Again, it is unlikely that the mentor will tell you all the details, but risk management is the most crucial factor of successful trades, especially for inexperienced traders. Nevertheless, there are basic requirements for a competent system which you can safely ask about in advance:
- What should be the percentage of risk for each trade? - Competent traders do not risk more than 3% of their capital at a time.
- What is the risk percentage for all open positions? - It is optimal not to risk more than 6% of the total capital for all open transactions.
- What is your risk-to-reward ratio? - The perfect ratio would be 1 to 3 or at least 1 to 2. Make sure the mentor actually uses this rule.
- How many open trades should I keep at a time? - Experienced traders are free to monitor up to 10 transactions. A beginner should be advised not to open more than 3 trades simultaneously.
Which Trading Style Should I Choose?
A good mentor should be well versed in all the nuances of trading styles and use a personal approach to each of his students. A teacher who simply wants to earn money will suggest you the style that he likes the most. A competent mentor will ask you a number of leading questions:
- How much time are you willing to devote to trading?
- What level of activity and risk do you prefer?
- How much are you willing to invest?
The answers will help you evaluate which trading style is right for you. It is important that the mentor teaches you the style that suits you.
What Type of Analysis to Use?
Each trader prefers his own approach. Most traders use a combination of technical and fundamental analysis. Some successfully trade using only one of them. In any case, a good mentor should be able to explain the advantages of each of the methods and teach you how to use them.
Do You Combine Forex With Other Markets?
Advanced traders usually trade various markets, such as bonds, commodities, crypto, etc. Concentrating on all these assets takes work, but it can diversify your risks. You should remember that all of the markets are interdependent. For example, now, the discount rate affects the crypto price, but 3-4 years ago there was no correlation between cryptocurrencies and the discount rate or stock market. Ask your Forex trading mentor if he trades other markets and how you can benefit from it.
When Is the Best Time to Trade?
A tricky question. It will help you determine the level of the mentor. A good trader knows that it is most favorable to trade in the European and American sessions since liquidity at this time is the highest. If the mentor offers to trade at any time convenient for you this may mean that the level of this teacher may be insufficient.
What Is Your Profit?
You won’t be given exact numbers. In addition, it depends on the size of your investment. You can find out about the return on transactions in percent, taking into account profitable and losing positions. It is also worth knowing how many trades the mentor opens on average per day and per week. There are times when high profits are achieved precisely by the number of transactions and not by their quality. At the same time, if you don’t have time to maintain the same number of positions then the percentage of your profit will be lower. Evaluate all factors.
How to Manage My Emotions?
First of all, the mentor must understand the importance of working on yourself. The teacher must explain how you can reduce the stress from trading, in what mood you should and should not start trading, and most importantly, how to deal with the flood of emotions that awaits you. The mentor should evaluate your emotionality and give practical advice on this issue.
How Do You Trade on the News?
The answer will help you assess the level of risk that the mentor is ready to accept. Many traders prefer to avoid the market during major news releases such as Nonfarm Payrolls. And this might be an extremely wise decision, especially for a novice trader. Other mentors will offer you to trade on the news noting that they use special tactics. Some trade exclusively price action after the news is released.
Decide for yourself how much you want to earn and how much you want to risk. This way, you can decide which approach and which mentor suits you best.
On What Types of Market Do You Trade?
Almost all traders are familiar with trend trading but not everyone knows how to trade the flat market. Remember that the market doesn’t always have a particular direction. If you don’t want to sit out periods when the market is in flat then choose a mentor who can trade on a sideways market.
One More Thing
It is important that you are comfortable with your mentor. Try to find out what kind of person he is, how easy it is to communicate with him. Do not rush to the first mentor that comes across just because someone liked him or he has good reviews on the forum. It may just not be enough for you. Remember that there are dozens and even hundreds of mentors out there. You will definitely find one that meets all your requirements. Good luck in your quest.