Learn To Be A Successful Trader in Forex Market
Everyone comes to the forex market for just one reason: making money. But why do most traders lose and give up on forex eventually while a few can still make consistent profits and even build a successful career? Let’s find out in this article.
Source: The investor’s podcast
What is a Trader?
A trader is a person who makes money from trading goods, nice and easy, right? And in the financial market, a trader exchanges financial products like currencies, gold, crude oil, or digital coins to make real money. The concept is similar but with different goods.
And how about contracts for difference (CFDs)? In this special market, traders don’t even need to own the physical products but trade the difference in the value of them for a certain period. The biggest advantage of this approach is that it makes the market more accessible to the majority since a person doesn’t need to go to an exchange or a real market but can still trade via internet connection.
A Trader vs A Gambler
Many people state that forex and other financial markets are the games for only big players like banks, institutions, funds, and companies while the retail investors are nothing but the prey for these financial sharks. And trading? Just another casino where you can’t win the dealer.
Let me tell you a secret. These people can’t beat the market because they assume trading is a game of luck. And you, a real trader must take trading as a business where you plan strategies, predict scenarios, and do research before making any decision.
Types of Successful Traders
So which type of trader who you want to be? A successful one, of course, but I mean which trading style you like to follow? Generally, there are 2 trader types: one is short-termed traders while the other side is long-termed ones.
The common feature of these traders is that their trades don’t last for long, just several days, within hours or even minutes. The shorter the duration, the more the trades they make. Besides, the volume per trade is usually small which also results in a higher number of trades.
Short-termed traders are truly chartists. They spend most of their time exploring the price chart to look for patterns forming profitable chances so they are also called technical analysts. Scanning the chart is quite a time-consuming job so normally, trading is also the main career of these traders.
To be a successful technical analyst, you need to be familiar with price setups presented by candle patterns and understand the meaning of indicators, which are algorithms displayed in charts. You use these indicators to confirm the price setups or to predict the upcoming price actions.
For short-termed traders, timing is a very important skill, which directly determines the result of a trade. Therefore, proficiency in analyzing charts and using indicators is the key to maximize your profits and minimize the undesired risks.
In contrast with the former style, the long-termed traders usually pursue the bigger trades lasting for a longer time like weeks or even months. It’s easy to see that chart-relating skills are now optional. The long-termed traders are fundamental analysts who study macro elements like interest or inflation rates.
Moreover, news and reports are references for attracting these traders. Analyzing them and using the numbers within, they know the potential impacts and thus, they can predict the long-termed movement of a currency, stock or crude oil. Generally, long-termed traders are investors.
However, before thinking about being an investor, you need to know that fundamental trading requires significant capital. Keeping an order for weeks always costs a swap fee; additionally, your trades last for a long duration so they need to be big enough to generate correspondingly decent returns.
How to Become a Trader: Defining Success
So how to become a trader, no not just a mediocre but a successful one? Let’s take a closer look at professional traders to see their common qualities.
Be A Student
The market changes every day and no strategy can work effectively for years. The pros know this fact the most and they need to change faster than the market. To do that, traders need to update constantly with new strategies, tools, and record the new market events.
The history can recall but with different scales so you need to pay attention to any irregularities. Sometimes, you can attend seminars or webinars if you live remotely. These workshops are great places to make friends with other traders and experts. Try to learn from their strategies and experience to complete your own ones.
Build A Trading Plan
As aforementioned, the biggest difference between a trader and a gambler is that the trader always navigates his way instead of leaving it to the market. To do that, they need to make a plan to follow just like a Christian with the bible.
The trading plan consists of various factors like strategies, fund allocation, risk management, and others. It tells you where to make your entry and where to make your way out, how much money you should spend on a position, and the risk level you can accept. On a nice day, luck can bring you a fortune but there are always bad days and a proper trading plan is the only thing that can help you survive and beat the market eventually.
Practice Makes Perfect
Trading is a very long road, even if you are either a short-termed trader or a long-termed one, and you can’t just be a pro in one or two months. Most successful traders are at middle age or older because they have enough experience to deal with the market’s waves. So, keep calm and carry on.
If you have a proven trading plan, it can help you stay with the market long enough to get an essential experience. After that, you can learn from your mistakes and optimize everything to generate way more profits. Remember that loss is an indispensable part so if it doesn’t matter if you lose several trades.
Review The Performance
And don’t forget to create a trading journal to summarise your trades. The trading journal is not just a boring history lesson but also an analysis tool to determine your strength and weakness. Exploiting it, you can know how to choose the most profitable chances and how to avoid potential risk.
In every field, from sport to business, the most successful ones and organisations always want to make the most out of the tiniest details. Trading is not an exception, you optimise your performance from part to part and you will get the best one eventually.
Beginner’s Steps to Become a Forex Trader
Okay so that’s how professional traders do with their career but it’s the latter part of the story. Let’s go back to the start and be a real trader priorly.
Look For A Reliable Broker
This is the most important thing when you just step in the forex industry. The broker is a bridge connecting you to the market, without it, your trades are done. Therefore, only a trustful broker can guarantee a great long trading career. Several criteria you should take into account when choosing a broker are regulation, fees, platform, and customer service.
Regulation: A reliable broker must always be a licensed one. You need one or more regulators to supervise your broker, protect your rights, and arbitrate the conflicts of interest. Some reputable ones are MFSA (Malta), VFSC (Vanuatu), FCA (UK), ACP (France).
Trading fees: The broker makes money from fees like spreads, commission fees and others. You need to make sure that all of these fees are clear and there is no hidden one. Besides, in terms of fees, the lower the better.
Platform: The trading platform should be intuitive and easy to master. Most brokers provide their clients with MetaTrader 4 or MetaTrader 5. Both of these platforms have advanced tools and addons to promote analyses and trades.
Customer service: A good service can keep clients staying longer. You can try contacting a broker’s support team to see how quick their response is and how they help clients solve the occurring problems.
Work With Your Demo Account
After joining a broker, I suggest you not go to the real market instantly but try the demo account first because of 2 reasons.
- First, you need to get familiar with the trading conditions and fees of your broker
- Second, you are a new trader and you need to practice until you feel confident enough to deal with the harsh market.
The demo account is a risk-free environment but you should take it seriously. Plan your strategy carefully and try to avoid mistakes, by that, you won’t feel overwhelmed when trading with your real money.
Take Small Steps
Again, trading is a long road and you don’t need to hurry. Just step one foot then two feet, start with a low amount first to see how tough you are. If the first trades end up in losses, that low amount can’t make you bankrupt. When you can make consistent profits, add more funds, and keep doing that. One day, you will see how far you have gone and how much money you have made.
So that’s the way of a trader. You want to be successful, you need to take it step by step. Trading can be a high-income investment if you are patient enough and plan your business solidly.