24 Tips to Become a Successful Forex Trader
Forex trading is accessible for all the people who want to try it. It’s exciting because of the many opportunities it offers, and the profit you can earn. However, many traders still fail to reach their goals in this market, because trading has caused large losses to many inexperienced and undisciplined traders.
Today, let’s talk about some tips to become a successful forex trader to show you the best trading practices that the pros use.
Learning the ropes
There’s nothing wrong to admit that you know nothing about forex trading. What’s wrong is doing nothing about it. If you want to become a forex trader, you have to know all the basics about forex strategies the factors that affect the market, and many more. Remember that learning never stops. Even if you think that you know everything, there are still more to discover.
Before start trading, you have to know yourself in general. Know your risk tolerance, and the financial goals you want to achieve. Get to know more about yourself, because there are various trading styles that suit in different personalities.
Stick with your Plans
Once you’re done setting a goal, it’s time to make a plan. You must set a time frame and a working plan for your career, such as the time you can devote in trading, how much money you’re willing to risk, what and strategies you’re going to use. When you have your goal set out, it’ll make it easier to abandon the endeavor entirely in case that the risks/return analysis precludes a profitable outcome.
Choosing your Broker
Many forex traders have failed from the start due to the fact that they failed to realize that choosing a broker is extremely essential. It’s equally important that your experience level and trading goals match the details of the offer made by the broker. It’s also essential to be comfortable with their trading platform, and their customer service must be reliable. There are thousands of broker reviews on the internet, so be sure to check them out before choosing your broker.
Choose an Account Type Wisely
Choose an account type that is most suited to your expectations and experience level. The general rule as a beginner is that lower leverage is better. A standard account is all you need if you have a good understanding of leverage and trading in general. If you’re completely new as a forex trader, it is recommended to undertake a period of study and practice by the use of a mini account or demo account. The lower your risk, the higher your chances, so make your choices be as much as conservative as possible.
Start Small, then Expand through Gains
One of the most useful tips for a forex trader is to begin with small sums, and low leverage, while increasing your account through generated profits. There’s no denying that a larger account will allow greater profits. But you can make your account larger through your trading choices.
Focus on a Single Currency Pair
Being the largest market in the world, there are countless currency pairs you can trade. But it’s hard to keep up with the different kinds of financial activity that happens around the world. With that, restrict your trading activity to a currency pair you understand, and familiar with it. You can begin trading the currency of your country, but if it’s not your choice, choose the highest liquidity and most widely traded pairs.
Maximize Your Time
A successful forex trader is never content until they do the things today that are meant to be done tomorrow. You have to grab every opportunity to achieve your goals. Try opening a demo account from your broker to help you practice and hone your skills in trading, rather than doing nothing. You can practice to your heart’s content, and get the feel of your broker’s trading platform.
Since we’re in the topic of demo account, you can test out some strategies to see which work best for you. Make mistakes, and learn from them. Because once you’ve opened a live account, some mistakes may cause severe losses, losing all your money in the process.
Excitement, greed, panic, fear, euphoria, or any other human feelings have no place in a calculation of a forex trader. While we can’t completely eliminate these emotions, we have to find ways to minimize and control them. That’s why forex traders are advised to start with small accounts. Remember, logic should always decide when making decisions. By reducing your risk, you can be calm enough to realize your long term goals, lessening the effect of emotions on our trading choices. A logical approach and less emotional intensity are the best forex trading tips needed to a successful journey.
Do only what You Understand
The worst mistake a forex trader can do is doing what he doesn’t understand. It’s fairly simple, if you’re unsure that you know what you’re doing, do not trade. Make sure that you’re confident in what you’re doing, and understand the consequences.
Don’t add to a Losing Position
No one can predict where a currency pair will be heading during the next few hours, days, weeks, or months. There are numerous educated guesses from the experts, but no knowledge where the price will be a short while later. Therefore, the only value about trading is the present. Don’t think too much about the future. Unless you like gambling, there’s no point in adding to a losing position. A position in negative territory can be allowed to survive on its own in accordance with the initial plan, but adding to it is not advisable.
Start a Trade Journal
A successful forex trader will always keep a journal that contains his trading activity. All of his successes and mistakes are recorded to find out what works and what does not. While there are many strategies and tricks out there, remember that experience is your best teacher.
Automate your Trading
In line with emotional control in trading, one of the best actions is automatizing your choices and behavior. This could help you minimize your emotions, ensuring you a successful and profitable career. But we are not talking about using forex robots, or buying expensive technical strategies, all you have to do is make sure that your responses to similar situations are similar in nature. To make it simple, don’t try to improvise. Let your reactions follow a studied and tested patterns to market events.
Forex Robots and Bogus Products are not Reliable
These unproven and untested products are very popular nowadays. They produce massive profits for their sellers, but little or none for their naïve customers. As people want instant and large money, they tend to buy these products without any considerations. Think about it, if these products are true, wouldn’t everyone become a millionaire by now?
Keeping it Real and Simple
Forex trading is certainly not rocket science. There’s no easy way to get rich in the forex market, whether you are a mathematical prodigy, or an economics expert. Instead, determination, discipline, and a clear goal in mind is the only way to become a successful forex trader. To achieve this, you must resist the temptation of making things complicated, such as overanalyzing and rationalizing your failures. Every trader experiences failure, and it’s best not be discouraged by it.
Don’t go against the Market, Go with the Flow
As a general tip, a forex trader who’s just beginning shouldn’t trade against the trends, or to pick tops and bottoms by betting against the main forces of market momentum. What you should do is join the trends so that your mind is relaxed. Fighting the trends can cause stress and fear, leading to a potential destruction of your career.
Make a Trading Strategy
A forex trader needs to have a clear vision. Meaning, it’s about having a good idea of possible market moves. There are many trading strategies to apply. But that doesn’t mean that you should use them all, because what’s more important is having a strategy that you feel comfortable using. This will take a lot of time since it’s a trial-and-error process. You have to understand what and why you are doing it. In addition, don’t get discouraged by how much time it takes. In the long run, it’s definitely worth it.
Learn Money Management
Don’t be one of those people who spend all their earnings, and lose them immediately. Once you make a profit, you have to protect them. Money management refers to the minimization of losses, and maximization of profits. It’s the key to success in any marketplace, but particularly in the forex market. To make sure you don’t throw your hard-earned profits, to cut your losses short, and let profits ride, you should center money management in your trading strategy at all times.
Apply Stop Loss
In relation with money management, you must also know how to handle risk. More often, fundamental factors can send currency rates swinging in one direction. Sometimes, the rates whipsaw into another direction in just minutes. That’s why it’s essential to limit your downside by always applying stop loss points, and trading only when there are good opportunities.
Learn what Affects the Forex Market
Faulty analysis is not always the cause of a ruined account. Consequences of erroneous application, or understanding of fundamental studies are not the cause of a failed forex trader. Other issues that are related to money management and emotional control are more important than analysis for a beginner. But when those problems are overcome, and steady gains are realized, the edge acquired by successful analysis of the markets will be invaluable. Analysis may be important, but only after a proper attitude to trading and risk taking is obtained.
It’s Natural to Lose
Even the most successful forex traders in the world will lose money at some point. It is inevitable, and it will happen to everyone. There’s no such thing as 100% success rate in forex trading. Thus, you should never be scared of losing a little bit of money. But, you still have to take steps to minimize the amount you’re going to lose. Remember that stop losses can minimize your losses, and maximize your gains.
Know when to Walk Away
This is about taking a break, but not walking away literally. A successful forex trader knows when to walk away, and take a break, whether he win or lose. Those who are really passionate in forex trading know how hard it can be to leave the scene, especially when he’s winning. This is because emotions are running wild, and would sometimes get the best of us. But it’s a necessary to become successful.
Never Give Up
Given that you know the risk you’re willing to take, the discipline, and the determination to win are all great advantages. Nothing will make you a trading genius overnight, so it makes sense to await the development of your skills, and the maturing of your talents before giving up. But in case something went wrong, remember to never give up. Everything can be restored back to order. Take your failures as lessons. So that in the future, you’ll be prepared in whatever situations you’re going to face.
Anyone can be a forex trader, but it requires discipline and sticking to plans. If you start your trading journey properly, and applied these tips, you can achieve your goals of becoming a successful forex trader.