Many traders think they know what they’re doing but when it comes to making real success from currency trading, they often fail. Most of the time, when they think they’re winning, they’re actually losing long term.
This article is going to show what it takes to become a forex trader. It takes more than having a hunch that the price will rise or fall.
Put effort into studying
How can you be sure that the Fibonacci Retracement is the right strategy for a particular trade? Without the right amount of studying, you can’t be sure.
The logic is the same for every other forex strategy; if you don’t fully know how to use it, do your studying and apply it when you’re ready.
Don’t put off studying. This is a vital step in becoming a successful forex trader. Successful people never put off until tomorrow something they can do today. With the way the global political landscape is at the moment, anything can happen at any time.
This is why you have to develop a habit of avoiding procrastination. The best way to do that is just keep at it. Even something so simple as trading with a demo account can help you to battle procrastination.
With a demo account, you can practice to your heart’s content. This is very helpful when you want to get the feel of the trading platform and get acquainted with its features. It’s worth noting that some platforms will have tools available that others don’t.
Keep researching different theories and strategies, implementing them in the demo accounts before executing in live trades. It’s better to lose demo money rather than your own while in the learning stage.
Have a separate investment fund
You should keep all trading funds away from other earnings and expenses. This will become your bankroll and all deposits/withdrawals will be made into this fund until you’re in a position that you can take some out to spend as you wish.
This means that you need to be on a strict bankroll management strategy. You don’t have to invest a large amount to earn profit – you can maximise your investment, however small it is. B
y starting out small, you minimise the risk of heavy losses when large volumes of cash are involved. This is an essential part in understanding how Forex works and how to trade Forex online successfully.
Find the right currency pair
Although forex trading occurs 24 hours a day throughout the week, it’s best to trade during peak volume hours to guarantee liquidity. Liquidity is a trader’s ability to sell a position, which is much easier when the market is most active.
If you work a nine-to-five job, you’ll be available for trading either early or late in the day. Depending on the currency pairs you’re trading, high volume may occur at either end of those timeframes to conduct trades.
Also, stick to pairs that you have a the most knowledge about. For example, if you have been following the UK’s economy for a while, it’s best to stick to GBP analysis and trading.
Use effective leveraging
Many traders come to the forex market for the wide availability of leverage—the ability to control a trading position larger than your available capital.
However, while using high leverage has the potential to increase your gains, it can just as quickly, and perhaps more importantly, magnify your losses.
It’s been found that traders can be more successful when they limit the amount of leverage used, typically 10:1 or less. This means they never traded more than 10% of their account balance, which gives trades time to fluctuate in the market without being stopped out by a margin call.
Respect for Risk and Uncertainty
Successful traders have a huge respect for risk, and an appreciation for the dangers of uncertainty. They also acknowledge and work with the subtle difference between the two.
Risk is only a small part of uncertainty: every time a trade is made, something is at risk. Uncertainty itself is much wider: it is impossible to put a value on exactly how the market will behave later in the day, tomorrow or next week.
Some people try and price uncertainty, which they mistake for risk, however, it is hard to truly put a price on uncertainty
Top traders embrace risk, and respect uncertainty. They know crucially that they do not know what comes next and are at best making educated guesses. Successful traders are not gamblers. The only casino game successful traders usually play is poker, and they usually do not see poker as gambling since they can shift the odds in their favour.
In all other casino games, the odds are too heavily stacked against them. There must be positive expectation of a favourable outcome, not merely an assessment of market direction.
Keep emotions away from trading
If you find yourself becoming concerned about the market and effects on your trading, don’t follow your emotions. Giving into feelings of panic, greed or excitement is a sure way to ruin your trading career. Instead, maintain a logical and practical approach to your trading.
All traders should have a predetermined trading strategy to follow, so make sure you follow it. Don’t suddenly change your mind halfway through a trade based on emotion – you’re more likely to make irresponsible decisions which can cost you greatly. On the same train of thought, don’t chase losses based on your emotions as this can do a lot more harm than good.
If you make a loss on a trade, don’t get too caught up in the moment. It’s not uncommon so leave emotions behind.
Keep a record of your trades
This is the final thing you need to do to become a successful forex trader. We learn from our wins and losses so keeping a record of all trades is essential to your learning and understanding of the markets.