By Your Trading Mentor
MY MATHS IS PROBABLY SLIGHTLY BETTER THAN AVERAGE – BUT NOT BY MUCH
One of the questions I get asked the most as a forex trading mentor is if you have to be really good at maths to be a forex trader. This is one of the limiting beliefs which stops a lot of people actually starting to trade forex in the first place. To be honest, I’m ok at maths, but keep reading if you’re not because I don’t actually think being a maths genius is as important as you may think it is in forex trading. To paint a full picture of my maths ability I got an A at GCSE (not an A* like my sister who is an actual maths genius and went on to take an A-Level in maths) When I declared I was going to take maths for A-Level because I’d found it relatively easy up to that point in my life, my teacher told me that I’d probably peaked at GCSE and not to bother because I probably wouldn’t get very far with it. My sister found this hilarious. I was more relieved then disappointed and any formal training in maths ended there at the age of 16. I can add, subtract, multiply and divide very basic small numbers but don’t throw any weird numbers my way unless you have a calculator, a pen and paper and several minutes on your hands.
LEARNING FANCY EQUATIONS IN FOREX IS A WASTE OF TIME
It may look like there is a lot of numbers involved in forex trading but the truth is you don’t actually need to do any complicated equations with them. The big decision which you need to make when forex trading is whether to buy or sell (or sit on your hands) and that’s based on whether you think the market is going to go up or down. One of my very first ever mentees got very flustered and tearful one day while she was desperately trying to figure out the pip value of every single forex pair each time it changed value, and I cannot emphasise enough how completely unnecessary it is to do this. I introduced her to a wonderful tool called a pip calculator and she’s never asked me how to do that pointless equation again. For the record, I use an online pip calculator which is free and easy to use, link below (no affiliation) but there are also plenty of apps available, I believe one called Stinu is very popular for calculating the pip value of a currency pair.
PLACING A TRADE IS NOT LIKE A MATHS EXAM AT SCHOOL
So as I mentioned, your main job as a forex trader is to decide if the market is going up or down and if you want to buy or sell, it is not to figure out the exact pip value of every single forex pair every time it moves up or down. AND there are pip calculators available AND you’re allowed to use them because funnily enough, the fact that you were terrible at maths at school and failed your exam when you weren’t allowed to use your calculator, doesn’t mean much in the real world of forex trading, because you are allowed to use a calculator. I actually encourage it!!
SOME BASIC MATHS IS A PLUS (pun intended)
While its not essential to getting the direction right when placing a trade, some basic maths ability is useful when figuring out stop losses, take profits and also recording the information in your trading journal and then reflecting on this information. If you genuinely find it impossible to add or subtract 20 or 50 then you may struggle with figuring out some aspects of risk management. For example, if you know that you want to place your stop loss 52 pips away from entry on a sell position on EURUSD and the current price is 1.0579 then that means your stop loss goes at 1.0631. My top tip if you struggle with these sort of sums is to just remove the decimal place when putting it in your calculator and type in 10579 plus 52. If you wanted your take profit to go 3 times the distance of your stop loss away from entry giving you a risk to reward ration of 1:3 then you would multiply 52 by 3 giving you 156 and then you would take this number away from 10579 giving you 10423 so your take proft goes at 1.0423. Don’t worry I used a calculater on this and double checked the chart, no maths was done in my head. You also have the option of using a really clever little tool in TradingView called the position tool and for this is will actually do the maths for you by showing you were your stop loss and take profit go. By the way if you are new to trading then I couldn’t recommend TradingView enough for the place to do all of your charting and analysis, I’ve been using it since day one and have never looked back. Best thing is you can use it for free as long as you don’t mind the incessant pop ups, or if you want to trial the Pro version (about £11 a month) you can test it out for a month for free and cancel if you don’t like it using this link:
So, to conclude, you definitely don’t need to be a maths genius in order to be a forex trader so if that is what’s holding you back you can rule it out as an excuse now! Some basic maths does help so if you are genuinely terrible and struggle with basic sums you may find setting stop losses and profits a little bit tricky at first but even then you’ll probably get used to this side of things with a bit of practice.
Love from, Your Trading Mentor x