We all wish there was a tree in our backyard from which we can pluck dollar bills. In this guide, we’re going to tell you how you can become a successful forex trader by following six easy steps.
Unfortunately, our wish won’t be commanded, and we have to work smarter and harder to become successful.
Many of us want to accelerate our trading game, but not all of us become successful.
Why is that? Because we aren’t following the right approach to forex trading.
1. Don’t try to predict the market
One of the most common mistakes new traders make is attempting to forecast what the market will do, which almost always leads to disappointment when they get it wrong.
Since the market is volatile, forex trading is not about taking risks or getting ahead of yourself. Instead of attempting to be smart, you should be practical and patient rather than attempting to make money quickly.
The main issue with projecting the market is that you can get it wrong more often than you will get it right.
If you use that strategy, you can lose more than you win, which is not a good way to build a successful forex trading career.
Allow the market to decide the course and then trade based on the changes.
The secret to success is not predicting the market but rather adapting to the various changes in order to achieve success.
2. Try to limit your losses
The science of effective trading is more concerned with preventing losses than with making money. Your main goal should be to limit drawdowns and keep losing trades from shrinking money in any form of trading.
Most traders tend to use a fixed strategy with pre-determined exits to minimize losses. Stop-loss orders can be used to avoid making bad decisions during a trade, and trailing stops can be used to protect a position into higher profits while defending against unwanted reversals.
Besides, losses must be minimized, but all positions must be checked on a regular basis to ensure that the overall trading capital risk is kept as low as possible.
3. Don’t bite more than you can chew
Just as it is important to set stops on each individual trade, you must consider a specified maximum loss when managing your total trading capital.
The rule is simple: never trade with more money than you can afford to lose, and always have sufficient balance in the account.
When determining position size and capital investments, make certain that funds for active traders are not mixed with resources for other purposes.
Of course, if your losses regularly outnumber your profits, you can stop trading! Take a step back and a few days off.
When you’re ready to try again, assess your current trading strategies and go through your most recent trades, and then proceed.
When you start making money, put some of it aside in a small savings account in case there are any unexpected losses in the future.
Pro Tip: Don’t risk more than 1.5% of your margin on a trade.
4. Develop a trading methodology
You can’t make good decisions unless you understand the fundamentals of a particular strategy, and the best traders are those who are fully aware of the flaws in their method.
Concentrate on positions whose trading features correspond to your trading abilities and risk-reward attitude.
Don’t use complicated or sophisticated approaches just to sound like Isaac Newton.
If the approach is not suitable for your financial situation, you should avoid it, no matter how appealing it seems.
5. Be passionate about trading
There is no point in attempting to make a career in forex trading if you do not have a strong interest in obtaining a trading job. You will be confused by the various complexities in play and will become bored with all of the numbers and words. If you want to be a successful forex trader, you must be interested and enthusiastic about the market.
Invest in serious education. This is a key step in achieving success in forex trading. You need to find a mentor who can teach you everything you need to know about the market and various trading types.
You must be open to learning from a mentor in order to develop your own trading style.
6. Patience is key to success
Patience is needed when locating the right trade opportunities. Entering and leaving a trade at the right time necessitates perseverance.
What is difficult to understand is how to be patient and disciplined in order to do the right things and make good trading decisions. To be honest, it will be one of the most daunting tasks you will ever undertake.
To a new trader, sitting on the sidelines and watching the markets change while waiting for the right setups means losing money.
This way of thinking leads to a lack of tolerance and discipline, resulting in some of the most infamous trading errors, such as:
- Letting losers run too long
- Cutting winners too quickly
- Revenge trading
These actions will kill your account, and you can see your dollars poof!
Remember, as a newbie, your job is to learn how to make good trading decisions and survive!
The best way to remain patient and disciplined as a trader is to see your career as a marathon rather than a sprint.
Key takeaways
The fact that you are reading this article suggests that you are serious about your forex trading career and are actively seeking to improve your trading skills.
Many people believe that forex trading is a simple way to make money, but there are very few active forex traders. The explanation for this is, as, in any other occupation or industry, you must be at the top to make real money in forex trading.
Bottom line
Forex trading is a skill-based career, so your performance and execution must be top-notch if you want to be effective. You may equate it to sports, since only the best and brightest find success in professional sports, while the others remain mediocre.