When starting Forex trading everyone aims to be successful with it, otherwise, why would they start. Forex trading seems to be profitable for anyone, but in reality, it only works for those who are also working for it. That seems very logical but not many traders are understanding it fully, especially while making the first steps in the Forex industry. A lot of people try Forex trading, many of them quite it very soon, some of them trade with low profit and only very few people get successful and making profits constantly.
How to become a successful Forex trader? This is the question that bothers a lot of people and mistakenly they are all searching for the one answer that would solve all the issues, let’s call it Forex success formula. Sadly, there is not anything like this.
Like it or not, Forex is pretty complex, when it comes to successful trading there cannot be one tip only that fits all traders and helps them become successful. To master Forex and be profitable most of the time you need to understand some of the important concepts. As they are several I usually categorize them into three categories – Technical, behavioral and psychological. In this article, I will try to show you the tested ways of becoming a successful Forex trader.
Learn, practice, strategize
These are the three most important ingredients of the successful trader’s recipe. Take one of them out and you will end up losing all your money. Learning is the first step on the road of becoming successful and you should never underestimate its importance. If you want to become successful in the Forex industry try to learn as much as possible about it. There are a lot of guides, videos, and books about Forex trading. When you are entering the Forex industry and start learning about it the information might be overwhelming, many people who are motivated to become successful traders are getting so bothered knowing how much they need to learn that they simply stop doing it. Make sure that it will not happen to you. Here are tips for it:
- First of all, study the main concept of the Forex so that when you start learning how to trade everything will be understandable for you and you will not end up frustrated.
- Define what you need to learn. As there are a lot of things to learn you should know what should you start and continue with. If you will define what you need to know and break it down it will look much easier to learn without any stress.
- Do not just learn about the trading, but give it some time to understand the factors that are affecting the market, it will make it easier to understand and even foresee things when you start trading.
- Do not try to learn everything at once. As there are people who are getting scared of the quantity of the things they need to know, there are also people who are trying to learn everything before they start trading and the more they learn more confused they get because they are not implementing what they learn into the practice. Therefore, once you get a feeling that you know enough for starting to practice, do not delay it.
- Educate yourself constantly even when you are already trading. Does not matter how many years you will trade there is always something new to learn.
Practice only as much as you need
To become a successful trader from the very beginning, you need to start practicing as soon as you will feel you know enough for it. The best way to practice is to use demo accounts that give you possibility trade without any money and therefore without any consequences. Demo accounts are created for you to practice the trading and use it as much as you can. However, you should not overdo with it. Once you will see that you got the sense of how the trading goes switch to the real account. Demo accounts grant you the safety but only the real account will give you profits. Therefore do not spend months trading on the demo account as you will get too comfortable there, lose time and it will be harder to go to the real one where the loss affects your wallet.
Strategize but do not make it complicated
Strategies are the crucial and inseparable parts of Forex trading. Knowing this many new traders are spending much time on the graphs and analysis and are coming up with the complicated strategies and in the end, are getting confused and frustrated. To trade Forex successfully you need strategies but you need to make them simple and clear. What is the difference between having a complex strategy that you do not understand and not having a strategy at all?
You can find many legitimate successful Forex trading strategies, especially for beginner traders. You can start using them and once you will get better with trading come up with your own. Try to use several strategies while you are trading on a demo account or while you are trading with a low budget. This way you can reduce the loss and get to know what strategies work for you. Another tip for becoming successful Forex trader is to start trading with one currency pair only and add up other trading instruments over time.
Do’s and Dont’s of the Forex trading
Your behavior determines how successful you will be while trading. If you will only trade whenever you want to do it, and will not have a clear plan of trading it will be impossible for you to reach any success. Discipline is very important. Try to define your short and long term plan and goals for your trading career. Also, define how much money can you spend on Forex trading weekly or monthly and set a timeframe – how many hours do you need to spend on trading. If you want to make a living with trading and you want to become a profitable trader you will need to put more time in it. Sticking to such a plan will help you a lot especially when you will start trading with the larger amount of money.
Do not procrastinate
Since you are planning on becoming a successful Forex trader you need to look at the trading as if it is a job you need to do. Do not avoid or delay it till tomorrow simply because you are lazy or you want to watch your favorite TV show. Trading Forex requires devotion and patience, make sure to have them both before you enter the FX industry. The best way to do it is to have the right plan you design for yourself and follow. But the plan should be realistic. Do not feel too optimistic with your time and capabilities, if you will write down to trade 6 hours a day you might end up frustrated because you will not be able to actually do it every day. Measure your capabilities correctly, design a realistic plan and follow it every day.
Do not invest more than you can lose
When beginner traders think how to trade Forex successfully some decide that they need to invest a lot to be profitable. While the more investments will let you have a bigger profit while trading in the right way this approach is wrong, especially for ones who are just starting. Do not invest more than you can bear, I can call it the golden rule of successful trading. You need to understand that trading with the big capital and high leverage also meant a lot of loss. Not all your trades will be successful even if you are experienced traders. You need to understand it and therefore invest in the right way so that it will not damage your financial situation. Make sure you have calculated your loss and you can actually let yourself lose the money you are investing. Otherwise, you will end up depositing more and more and pretty much end up being broke.
Do not try to compensate your loss
This is a matter of experience together with the psychology of the trader and let me tell you many people have fallen in this trap. Imagine you are trading and you see that your trades are not going in a way you planned it from the beginning, you are losing your trades meaning that you are losing your money. At that point, many of the traders are getting nervous, which is pretty understandable and are trying to find a way somehow get themselves on the road again. Due to this the majority of the traders are opening new positions to win the trades and compensate theirs loses. While you are not opening the positions because you feel that’s a correct thing to do, but because you need to somehow compensate yours loses you will make the decisions that are not based on any analysis whatsoever but on your frustrations only. The results of such behavior can be foreseen from the beginning – you will lose the other trades as well and either try to trade more for compensating the new loss and fall in a loop of losing, or you will end up frustrated and will never want to trade again.
To become a successful Forex trader you need to avoid such behavior, the strategy and plan I was describing above will help you a lot in it. At the same time if you will have defined your loss margin, the amount of money you can allow yourself to lose without getting yourself in the financial trouble – you will be able to stop when it is needed not to continue losing again and again. Everybody has unsuccessful trades, it is part of Forex trading, hence you need to understand it and learn from it.
The psychology of successful trading
The psychology of successful trading can have a separate article itself. Even if you know a lot about Forex trading and feel that you are well educated in this matter and have had a good experience of trading, you might still not become a successful Forex trader simple because you do not have so-called trader’s psychology. Whenever there are business and money involved you need to make sure that emotions are set aside and you are working on the things without involving feelings. It is not an easy thing to do, however, there are you need to do or avoid doing to manage it.
When we are starting something new we feel excited and cannot wait for it to finally happen. This is the case with the majority of the traders as well. Many people look at Forex trading like magic that will make them rich very quickly. I will finally start trading tomorrow! – they say and put themselves to sleep thinking about the villa on the beach they will buy, Lamborghini they will be driving in a year and how their name will be written in the list of the most successful Forex traders in South Africa, or in the world. Then when they start trading reality hits and hits hard. Time passes but they still have millions of dollars on their account. Sadly, it is how it works. The majority of the traders will not be successful and the wrong expectations are one of the reasons why.
Your ultimate goal with Forex trading can be anything I have mentioned above, houses, cars, vacations, luxury or anything else, it is up to you. However, you should understand that it will require a lot of time, energy and capital as well. Therefore when you start trading you should understand two things – You will definitely a loss and you will not get rich overnight. Especially when you start trading you need to set the right expectations and therefore goals. If your expectations will be too high you will be disappointed, if they will be realistic you will feel the joy of reaching it and set the higher expectation and goals for the next period of time.
Fear is the biggest enemy of the trader. First of all, many people who want to start trading do not do it simply because they are afraid of losing money. When trading Forex fear works in two ways and both of them are connected to losing the money. Let’s see two examples.
John and Martin have just started trading, they do not have a big trading capital. Since they are the beginners they are not sure about their trades and are afraid of losing the money. However, the fear of losing affects each of them in a different way.
John is very careful with its trades, while he has a good ratio of successful trades he is not able to profit much because he is not trading with sufficient volume and a has very low leverage because he is afraid – if he loses he will lose more money. Therefore he ends up trading with low volume and not making enough profit. While being careful is very important always being on the safe side will not how to become a successful Forex trader. Once you feel that your trades are going successfully and you have a good sense of the Forex you will need to elevate your trading, again you should not risk more than you can lose however you need to be more daring. The best way is to make the calculated risks and trade accordingly to it.
While John is restraining himself from trading since he is afraid of losing the money Martin is acting in a different way because of the fear. When he sees that he might lose one trade, he starts more to compensate it and the fear of losing a small amount of money leads him losing even more.
You should not let the fear have a negative effect on your trades, understand that losing is part of the game, make calculated risks and acknowledge how much you can lose – with this the fear will not stop you from becoming a successful Forex trader.
Emotional trading is the biggest problem for many traders. I have already discussed part of it as the compensating losses and trading because your expectations are unrealistic are the parts of the emotional trading. Emotional trading happens when you see that your trading is not going in a way you want them to go. At that time you feel you need to do something to make it alright. At that moment the fear is affecting you, you are getting emotional and make trades that are not based on the analysis but only on your emotions.
The trades that you make while feeling emotional does not have any reasoning, you just choose the option that looks best for you at that moment and going for it straight away. This kind of trades can rarely be successful. What happens most is that you will lose more and get even more emotional.
The other example of emotional trading is the opposite of the above. While you might have the series of losing that keep you trading more and more, the same might happen when you are successful with your trades. It can be very seductive, when you see that you are doing well, you want to keep it and it might lead you to make the trades you were not going to do, it might be successful ones or twice but without the strategy you will start losing. Do not get me wrong, you need to trade when you think it is the right way to do, but your thoughts must be based on analysis and not on your emotions.
Learn from your mistakes
We are not trading robots, but humans who make mistakes. Do not get angry with yourself for making them but try to learn from it. To make it happen it will be great for you if you keep notes of your trades. It will help you a lot when you are just a beginner, but you will find them helpful once you are an experienced trader as well. Becoming a successful Forex trader involves observing yourself, successful traders make notes to experienced traders where they have had a good result and where they did not. After you have accumulated some data you can always go back and see what have you done right, how did you do it and what can you do to keep being profitable. At the same time keeping recordings about your mistakes will let you know what you should avoid and how to make your performance better.
Learn from successful Forex traders
This advice is not about Forex trading only. When you have some goal in life does not matter if it is business related or not it is always a good idea to see how people -who have succeeded and reached the same goal have done it. There are a lot of stories of successful Forex traders. Give it some time to read and learn what they have done in a way that made them successful. Get tips for becoming a successful Forex trader from the traders itself and never be afraid to ask. Remember, there is no such thing like a one and only formula for success that is known to successful traders only. There are many things that have worked for different people. Learning from the best will help you become the best by yourself.
You cannot become a successful Forex trader without it
As you can see it is not so easy to become a successful Forex trader, many people are desiring it but only a few will reach it. It might sound harsh, but I think it should make you want it more. The ways to be a profitable and successful Forex trader takes a lot of time, effort and there are many things for you to consider. However, if you are still searching for one answer on how to be a successful trader – the answer is determination. If you are determined enough to become the best FX trader you will be patient enough to learn, practice and use this knowledge in your tradings. The determination will help you stick to your trading routine and keep your mind cold while making decisions. So think how much you want it and if you will be determined enough – eventually you will become the successful Forex trader.