Every beginner and intermediate forex trader’s dream is to become successful and make a lot of money, but yet only few actually become successful traders, I have studied some of the behaviors which I found to be part of the many factor responsible for this failure in the FX market and why most will lose money consistently, today I will share with you some tips to help you succeed and become a profitable trader, here are tips to get you started.
CHOOSE A RELIABLE BROOKER WITH LOW SPREAD
There are different types of forex brokers offering different type of accounts from micro, standard to ECN, each broker that features forex investments has advantages and disadvantages. Some of the most important things to consider are regulation, the level of security provided by these companies and transaction fees which is the spread, also check for additional fee charges during deposit or withdrawal transactions, this is very important because small fees can add up to a large amount and eating into your profit potentials. There are a lot of forex brokers to explore from, you just have to find the right one that suits you and with the lowest spread.
DEFINE YOUR GOALS
Many people started trading because of the vast opportunity and quick returns of profit without understanding the risk involved, and that’s how they begin to use high leverage and huge lot size so the can make a lot of money in a short amount of time without first setting a goal.
Now the idea of setting a goal means it has to be realistic and achievable. This could be something along the lines of, achieving a 20% annual return on your investment for long term or swing traders, or a risk reward ratio of 1:2 for scalpers and day traders. Whatever you decide, your goal should also be easy to measure with the aim of long term achievement, I would recommend choosing at least a monthly goal to achieve rather than a daily goal.
MANAGE YOUR EXPECTION AND OUTCOME
Before placing a trade always remember that your potential for profit is directly related to your equity or capital at hand, read trader testimonials or stories so you have realistic expectations of possible returns, “not the fake stories of riches in a few weeks or months” and research the markets and currency pairs you are interested in. If you don't feel comfortable, don't invest your money in Forex, even if it might be profitable. And this applies to any market because any money loss is hard to gain back without proper knowledge.
CHOOSE A TRADING STRATEGY AND STICK TO IT
There are a lot of trading strategies out there and even on any time frame as low as one minute, some uses indicators to forecast the market, others simply employ the pure price analysis. Whatever strategy you choose make sure it is back tested on a demo account and has stand out in different market conditions, whether an uptrend, downtrend or a sideways market. And the potential for profit over the long time should be higher than the losses. In order to become a successful Forex trader, try to focus on creating a trading strategy that is in line with your individual risk profile, which in this case means to find out your trading personality. Research trading tool, study techniques and think how they can be implemented in your strategy. Study how the market behaves and learn how the trading industry works, it may take a while to have a strategy that works even 50% of the time and there is no holy grail 100% strategy, do not be misguided.
LET YOUR WINNING TRADE RUN AND CUT YOUR LOSERS
Every time I say this to traders they stare at me like “How am I supposed to be sure the losers aren’t going to be the winner” well the only way to be sure is by using a stop loss and a take profit target, because a winning trade will likely be in profit in the first hour and stop loss it defines our risk limit.
CONTROL YOUR EMOTIONS
This is one of, if not the most difficult aspect of forex trading. Emotions can you worst enemy as a forex trader. No one has fully mastered their emotions, but professional traders have device a means to overcome them. To become a successful trader, you must understand the mechanics of the Forex market, trust your analysis, and always follow the rules of your trading strategy.
ALWAYS GO BACK TO THE DRAWING BOARD
Practice make perfect, forex is like any other profession in which you have to study and then put the knowledge to practice, take advantage of the demo accounts to practice and sharpen your trading skills before applying them on a real account, that way you can test the efficacy of your trading strategy and learn from you mistakes without actually losing money in the process. Never feel too big for the demo account, it may be your best tool to succeed in the market.
FOLLOW THE MARKET ANALYSIS
Staying current with market news and analysis is vital. Many market movements are driven by news, central bank announcements on interest rates, political events or just the expectation of any of these. check the forex calendar to make sure you are aware of all the upcoming events which could negatively impact your trade. Even if your technical trading strategy works perfectly, fundamental news can change everything in seconds.
NEVER OVERTRADE OR OVERLEVERAGE
These the two common mistake that have the consequence of blowing up your account, there’s is no need to open a trade of 10 different currencies because you feel that diversifying your trade will compensate for the losing trade, even if you’re experience the chances of all becoming profitable his highly unlikely, Overtrading is the result of seeing opportunities to make money trading where there are not any. Some people who want to be traders and become profitable in as short a time as possible, look for as many opportunities as possible to reach their goal and may deceive themselves into putting their money at risk. Overtrading is the result of seeing opportunities to make money trading where there is none. Some people who want to become profitable in as short a time as possible, look for as many opportunities as possible to reach their goal and may deceive themselves into putting their money at risk.
Overleveraging will do same damage to your account, always choose a leverage that you can work with and stick to it.
NEVER TAKE A REVENGE TRADE ON THE MARKET
Always remember, the market is a friend of no man, it has no guilt nor conscience, but always reward the patient and diligent trader. If you ever find yourself in a losing streak, take walk, watch a movie, play music but never go for a revenge hunting.
ALWAYS CALCULATE YOUR STOPLOSS AND TAKE PROFIT TARGET BEFORE PLACING A TRADE
One of the rules I found particularly useful in avoiding taking profit too early of or quitting a losing trade too late is to use the stoploss and TP target, you never put them after a trade because then your emotion is likely to be in play. After you place you trade just let it run and never adjust your trade except when absolutely necessary.
In conclusion I’d like to say that the Forex market is constantly changing, so traders need to be able to understand the ups and downs of this market and how to approach it. There is no pattern, secret formula or set of rules to guarantee success in the Forex market. To succeed, one must need to be patient, diligent and observant.