The idea of forex trading is getting good visibility since 2020, but so much so many people lost reasonable amount of money.
Reason? Most people jumped into forex unprepared. They got the idea of the possibility to become millionaire overnight by trading forex and then they went all in. To further complicate the experience, the internet is filled with ebooks containing recycled concepts or incomplete strategies which the authors themselves do not use. So they mostly make their monies not from trading but by selling untested ideas to novice forex traders.
Let’s get this cleared out and simplified. Yes you can make a good living out of forex, but you need to put in the work. And so I’m going to be discussing 7 simple steps for you to start trading forex and be successful in it.
- Understand your place in the Forex Market.
This is a very important thing to note that you’re actually a small fish in a really big ocean. Forex is massive and has centuries of history behind it. You probably just learnt about forex few years, months, weeks or days ago… so you need to take the chill pill first.
Learn to swim along with the big fishes in order to make a living out of it.
- Learn to read the Forex Charts and Understand the Foreign Exchange Market.
Many novice forex traders take trading like a game, predicting the direction of the prices and hoping to make money by being correct all the time… and by so doing several people have blown their accounts and formed a firewall mindset about forex that it is not for them.
What you need to do is to learn how the chart works, and how it relates to the news you hear on the foreign exchange markets. If you’re not used to listening to foreign exchange news, now is the time you should start getting interested in it.
- Money Management
You need to understand how to manage your money and risks at the same time. It is always advisable to take your mind away from the money you’re hoping to make from forex, rather focus on the trade and how you can get good at it. It is a common concept in forex that a single trade at any point in time shouldn’t be more than 5% of your account capital. Following this concept is crucial to your peace of mind when entering a trade. Understand this that if you win 6 trades and lose 4 trades in a day, you’re most likely not going to make a single profit for that day’s trade. So it is advisable to exercise patience and be dynamic in your trades.
- Focus on the Market
Several novice traders simply opens their trading software / apps, activate their latest hot indicator and proceed to placing trades on a live account, risking their hard earned money. Few wins might come from this but it always doesn’t end well. Indicators fail and thus leaving the trader with no experience or skill in the industry.
Using the Fibonacci, Pivot points, price channels, MACD, RSI etc indicators does not guarantee a successful trader as both successful and unsuccessful traders use this same tools all the time.
It is sometimes advisable to master few currencies by favoriting them, that way you have an understanding of the currency history and can conveniently reposition yourself if you enter a bad trade.
- Plan your trade and trade your plan
It is no longer new that every trader must have a trading plan. The popular saying “Pips pays the bills”. It is every traders’ goal to make pips on each forex trade and so there must be a plan to make this work all the time. When it doesn’t work, work on improving your plan and then stick to your plan.
- Never trade with emotion
Your mind is your strongest asset and weakest link. Always be sure to not attach your emotions to your trades. Imagine when you want to learn to drive, your first day behind the steering wheels might be your scariest day. But as you kept at it, now you can almost drive with one hand and half attention and still be comfortable knowing you’re safe. This is the same with trading. Thankfully most brokers open accounts with demo platform to get you rolling on the system without risking your money every step of the way, and when you’re confortable enough with your trading skills, you can go live.
- Understand the Forex Market is always right, and expect the unexpected.
The forex market is an interesting place, and always come with lessons to be learnt. Do no get wrapped up in past successes. No matter what your research, forcasts, indicators or charts might tell you, sometimes the forex market can just do the exact opposite.
When this happens, do not let is dissuade you or affect your emotions. And thankfully there is the concept of “take profit” and “stop loss” so you really don’t have to lose all the money you entered into the trade. If the market decides to go in the exact opposite direction of your projected plan, you can simply cut the loss and recover your money… or just wait as most professionals do to allow the market make a possible turn around to their favor.
Are you a forex trader, or you’re an aspiring forex trader, or you’re reading about forex for the first time, or you’re actually a professional?
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