It is true to state that the forex market offers endless opportunity to make a great fortune. Nevertheless, it is not a place for the faint-hearted. Only the strong in mind, heart and will can make it on the forex market even when others are failing. This is because not every trade you make will be successful even the ones that seemed promising at first. So in other to truly succeed on the forex market, you need more than just education about forex notwithstanding the fact that, that is also a very useful thing to have. Many amateur traders lose a lot of money on the forex market. Some even quit. Some of you have not even yet started trading but are quietly groaning and wishing for a way forward due to the lack of information on how to be a good forex trader or how to trade on Forex. Have you ever wondered how foreign exchange traders make money? If you have and are reading this article then you are in luck. This article is meant for you.
What is forex and how does it work?
What is forex business, one may ask? The forex business is simply the buying and selling of securities on a globally decentralized market. You buy at the bid price and sell at the ask price.
It is such a privilege to be born in this era because many years ago, forex was not accessible to people like you and I. It was only accessible to big banks and hedge funds. But thanks to the establishment of retail brokers, anyone anywhere on the surface of the earth can either open a local account or an offshore account and start trading on the forex market. Below are tips and keys to successful trading on the forex market for beginners and professionals alike.
Carefully choose your broker
One cannot dispute the great importance retail brokers serve to traders and the forex market as a whole but it is of equal importance to stress that some forex brokers simply offer bad services. Some of these brokerage firms are simply out for your hard earned money. They will promise you things that are unrealistic and many amateur traders buy into their lies. This is one of the major reasons that is hindering some people from trading on the forex market because they do not know who to trust and how to pick a good broker. To pick a brokerage firm to work with, you must first check if their offers are in alignment with your trading goals. Secondly, you need to check and be certain that they are licensed to operate. Check how good their customer service is. You need to also be clear on their payment and withdrawal options. After checking all these and many more, and you are certain that the broker is trustworthy, then you go ahead and trade with them.
You have to trade like a machine but think like a man
As I said earlier on, it takes the strong in mind and heart to be able to truly succeed on the forex market. Just like any business venture out there, there is always a possibility to lose profit. And the forex market isn’t any different. Because no matter how well you analyze the market, there are days you will lose money. This is because no single organization, government or individual controls the direction the market will take at any point in time. So you need to be emotionally prepared before you start trading. You need the discipline and attitude of a soldier. Also in other to minimize the emotional toll that losing money on the forex market can take on you, you need to trade mostly with money that you can afford to lose. Especially when there is a fifty percent chance that your stand on a trade might be the wrong one. This way, you will not be too bothered in case you lose your money. Ego it’s important to trade within your income level and avoid unnecessary risks. Because once you lose the money it is gone for good. There are always risks in life but unfortunately this is the risk that comes with trading on the forex market and as such you need to be able to endure lose in other to be a professional trader.
Take notes of your success and failures
To be successful in this business you need to make notes of your progress. This is something that every successful forex trader out there has tried and it works. You need to take inventory of your success and failures. Make notes on the mistakes you made so you do not repeat them again. Experience they say is the best teacher. So in other words, make notes of your experiences. This way, your chances of making a profit at almost every trade you make is assured.
Start with single currencies and expand as you grow in skill
The forex market has been hard-wired to be complicated so its difficult to keep track of all the activities on the market. And as such you need to start with the basics and hone your skills before moving to the next phase when trading on the forex platform. Just like anything skill out there, in other to master the difficult and challenging part you need to master the basics. So it is with forex trading. You need to start trading with single currency pair as they are relatively much easier to understand and navigate. You can also start with the most liquid currency pair like the EUR/USD and as you grow in your knowledge of the forex market and in skill you then trade on multiple securities.
This point probably should have been the first to be mentioned because everything begins and ends with you. It is very important to know yourself before trading. Things like risk tolerance level and capital allocation are things you need to know and understand before you begin trading. Without prior knowledge of these things, you will easily quit. You need self-awareness to ensure that the allocation of your capital to forex trading is not lacking or excessive.
Pick the account type in accordance with your needs
It is necessary that you pick your account type in accordance with your needs and expectations. Brokers offer different types of account structures. As a beginner, you need to start with an account with lower leverage. Account types like mini and standard offer a relatively lower leverage. So if you are a first timer, it is often advisable to start with a mini account. Most brokers will not tell you this. In fact, they will advise you to do the opposite. But that can be dangerous for a beginner. So start small and gradually move up the ladder as this lowers your risk of losing huge sums of money. Also, bear in mind to start with small amounts and increase the account size through organic means not with greater deposits. Basically, the aim is to lower your chances for losing huge sums as a beginner so you do not get discouraged easily. This has happened to at least five people that I know of. They got discouraged because they started big and lost huge sums. Do not do that to yourself.
Do only what you know and understand
Many traders make the mistake of trading based on other people’s opinions and views without considering whether it will be right for them or not. Do not act without knowing the positive and negative repercussions of your decision. You have to understand that it is your money and whatever happens to it is on you. Everybody has got an opinion on what is and what is not but you are trading for yourself so you need to trade based on your opinion. That is why it is important to have the necessary tools and information on the forex market before you trade. Many successful Forex traders have made the same mistake but you have the advantage of learning from it before making the same mistake.
Make a plan. Stick to it to achieve the goal
A great man once said, a life without a goal is a wasted one. The same principle applies to trading on the forex market. This is one of the core keys to successful trading as is everything in life. You need to set a goal for trading. This will help keep you grounded and on course. Now that you have a goal, what is the plan to achieve it? Do you make long-term trades or short-term trades? What is the timeframe for many trial and errors? All these are possible scenarios to include in your plans for a better future in your forex career.
You should not add to a losing position
This is very logical but people still do it with the aim of making a long-term profit. Nobody knows the direction the market will go. All opinions are just educated guesses. So trading on the losing stand now and hoping it will change in the future is dangerous because nobody knows when in the future it will change. You should start trading when the trade position has shown signs of change.
Never rely on forex robots
It’s surprising that most people are relying on this unproven fallacy that trading with forex robots offers a better chance of success. Have you ever once considered that if these robots are as effective as they say they are why is it that these genius inventors do not use the robots to make billions for themselves? If these inventors are not using it then you should not also use it. It’s that simple. What these robots really do is generate profit for their sellers. Do you want to be really successful in the forex market? Then consider these facts written here and do some research to gain more understanding on how the forex market works and finally hone your skills and you will be alright.
Do not go against the market trends
Asa beginner, it is always advisable to go at a slower pace. It is not a competition. It isn’t advisable to go against the market trend as an amateur because doing so can easily wreck your interest in the forex market. When trading as a beginner, you should start with the major currency pairs and go with the direction of the market so as to ease yourself into the environment gradually.
Never forget that forex is all about probabilities
This is the reason why you should never believe anyone who gives you assurance that they can make profit for you on every trade because the forex market is all about probabilities. Even the seasoned traders sometimes loose. This is the mindset you need to have. This way, you will not be that much affected in case you lose a trade. No method is ever accurate enough to generate profit every time.
Study the technical and fundamental factors that affect the price movements
For every decision you make regarding trade, it needs to be backed with accurate information on current affairs on the market. The technical and fundamental affairs like information on the news, economic and political events in certain countries like the USA, market sentiment and past trends. All these need to be studied and factored into the decision making process. For instance, it is an established fact that the prices of gold are mostly parallel with the US dollar. So with this prior knowledge, when the price of gold spikes your obvious choice of trade will be currency pairs will positive correlation with the US dollars. An example is the EUR/USD currency pair.
Learn to manage money
Mooney management should be at your very core if you want to succeed in this business. Once you make a profit, you protect it. Do not gamble away the profit you make with the intention of making more out of the profit you have made. You need to use the profit in a strategic manner that suits your reason for starting this business in the first place.
Try the things you learned in demo
The demo is usually a good place to start practicing how to trade in the real-life market. When you start in the actual world know that the emotional experience you had with the demo will be different because when you lose in the real world you do not get the money back. It is always best as a first timer to start trading with smaller amounts as this will help you get familiar with the forex market and also help you build better strategies for when you start trading in millions. So always remember as a beginner that smaller is better.
Never give up
Finally, you should never give up on yourself. The road to greatness is never an easy one. You will definitely lose money on the forex market so be prepared mentally and emotionally. It happens to everybody. Even the most seasoned traders still lose money. Keep in mind all that has been discussed above and you will be fine. Listed and discussed above are some of the obvious mistakes people have made over the years in their forex career. So actually quit and tried again in later years. Some persevered and are at the top today. In my experience there is no success story without failure. Which will you be? Will you be a quitter when it gets rough or you will pass through the painful moments and come out strong? You have the advantage of learning from their mistakes and never to repeat them.