How to Become a Successful Forex Trader

By: How To Become A Forex Trader.

Forex trading is profitable if you have good trading strategy. You however need more than just a perfect trading strategy; you equally need to have your six senses alert and develop a reliable money management strategy, without which your chances of making profit in forex trading are slim. You can trade forex as a part time or full time trader, depending on what works best for you. As hinted earlier, you need a perfectly working trading strategy as well as a faultless money management strategy in order to make headway in forex trading. You must however note that there is no forex trading strategy that can give 100% positive outcome. However, a good forex trading strategy should give high percentage of profitability.

Before you learn how to be a successful trader, you should know one or two things that make forex traders to fail. They are discussed below:

  • Lack of discipline: Lack of emotional control is paramount among the reasons why forex traders fail. If you are unable to discipline your emotion, your chances of success in forex market are limited.
  • No specific trading plan: If you venture into forex trading without plan, then you stand a good chance to fail woefully. As the saying goes, “he who fails to plan plans to fail.”Successful traders create specific forex trading plans that fit with their peculiar situations and stick to them. They perfect the plans as they progress to make such trading plans more profitable. Traders equally fail when they do not have workable risk management rules and are on the lookout for unreasonable return on investment.
  • Failure to adapt to forex market: A successful trader would preplan trading strategies before each trading day opens. He/she would have moves and countermoves on ground to cater for eventualities in the course of the trading day. Any trader that fails to fully adapt to the changes in forex market is billed to make more losses than profits.
  • Lack of education: One constant factor in forex trading is education. Any trader that refuses to learn is far from becoming a successful trader, that is, if the trader is not depending on forex robots.
  • Trial and error learning: It is more painful when you learn from your own mistakes and errors. No sensible forex trader would just venture into the market without clear understanding of what he/she is venturing into. A successful trader would learn from other people’s mistakes and avoid doing such mistakes.
  • Unrealistic expectations: New traders are guilty of having unrealistic expectations. Many of them think they can make six figures from day one in forex market. Many of them think forex trading is a get-rich-quick scheme and they end up getting their fingers burnt. Many never want to accept that profit-making in forex trading is a gradual process; they end up making silly mistakes and losing every dime in their account consequently.
  • Poor money management: This is yet another factor responsible for failure in forex trading. A forex trader that has good trading strategy without good money management strategy is bound to fail.

Aside the points mentioned above, what other factors must you keep in mind to make you a successful forex trader? Some other important things you must keep in mind on your journey to successful forex trading will be considered below.

Stick to particular currency pairs

Knowledge is paramount in forex trading; you need to be knowledgeable about the forex market and you need to have adequate knowledge about particular currency pairs. These currency pairs do behave in certain ways peculiar to them. You need to know about such peculiar behaviors. Such knowledge is boosted if you concentrate on that particular currency pair especially during your demo trading. Particular currency pair has specific times of the day when it has high volatility. Concentrating on particular pair helps to stabilize your trading and helps you to plan your time on when to trade. This way, you will not have to stay glued to your computer watching market movement all day long.

What currency to trade

As a beginner, truth is it is better to stick to the US dollars against other currencies. Choose among currency pairs like USD/AUD, USD/CAD, USD/CHF, USD/GBP, USD/JPY and USD/EUR. As you gain experience over time, you may test the waters using other currency pairs. Truth remains that the US dollars is powerful and it will be foolhardiness to trade against it if you do not know what you are doing. Are you planning on being a part time forex trader due to limited time availability? Then it is better to stick to the USD/EUR pair. Why so? This pair does not undergo excessive volatility like many other pairs.

What about automated trading?

If you are just coming up in forex trading and have very little experience, you can opt for automated trading. This involves the use of what is called forex robots to place trading orders for you. The robots are designed to read the forex market using preset parameters and place trades on your behalf. They can also exit the forex market for you when their preset exit parameters are met. These forex robots are designed to place market orders and also monitor activities on forex market in real time. The robot makes complete automated decisions and you will never have to lift a finger to make profit in forex trading. Some of the factors responsible for failure in forex trading are lack of discipline and emotional involvement, as discussed earlier. These are factors that are completely eradicated when you trade forex market using forex robots.

Be disciplined and control your emotion

You need to trade forex market dispassionately in order to be successful in it. If you are not depending on automated system for trading, then you have got to be disciplined and put your emotion under check. Do not wait for wide profit margin before taking trades; just place market order when the condition satisfies your predetermined trading strategy. Discipline will enable you leave a position open as long as it still favors your trading plan. Forex market is highly unpredictable. Once your open position starts to move in your favored direction, start trailing the profit since the unexpected may happen and the market may turn against you and this can lead to loss of already recorded profit. How do you trail profit? Simply adjust your take profit and stop loss as the market progresses.

Fundamental and technical analysis very important

A complete forex trader is one that is knowledgeable on both technical and fundamental analysis. Fundamental analysis has to do with news trading, while technical analysis has to do with what happens on the forex trading platform. The general understanding is that the news actually controls, to a great extent, what happens on the trading platform. News release can abruptly change the situation obtainable on the trading platform. Some experts advise that a trader basing his/her trading strategy mainly on technical analysis should be on the lookout for high impact news release. It is advised that such traders should not make market orders around the time when such high impact news will be released; as such news can change market movement abruptly on the trading platform.

What account to open?

As a new and inexperienced forex trader, it is better to start trading using relatively small amount of money. Start by opening mini forex account. You will only need to deposit small amount of money to operate such account and it will enable you control up to 10,000 currency units. Cash deposit for mini account depends on the forex broker you choose. Some may require minimum deposit of $2,000 to operate mini account; some other ones may allow you to deposit an amount as small as $200 for the mini account. With mini account, you will have access to high leverage and this will make you substantial profit per winning trade and can equally lead to substantial loss if the trade goes against you.

Before you fund your trading account…

Every forex trader hoping to succeed in the forex market should never trade with any amount they cannot afford to lose. This is why it is never advisable to trade forex using borrowed money. If you cannot afford to lose that money, then do not use it in trading forex. Do not place too high expectation on the money you are depositing; for all you know, things can turn against you. Be ready to accept your profit and loses. When you may profit, do not expect it to be consistent. When you make loss on the other hand, never attempt to take your revenge on the market; you will get your fingers burnt. When you experience any loss, take a break and analyze what led to the loss. Make corrections and prepare for another challenge the next day. Do not forget that you cannot have your way with forex trading all the time.

Demo trading is a must

Never venture into live trading before perfecting your acts via demo trading. Demo trading enables you to fine tune your trading strategies and gain lot of confidence. The chances of error will be minimal if you have fine-tuned your strategy on demo trading. There is no specific length of time to spend on demo trading before venturing into live trading. However, make sure you have gained adequate level of knowledge and confidence with your chosen currency pair and your preferred forex trading strategy.

 

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