Each and everyone of us has at one time or another been brainwashed by media advertisement that we can make quick money by trading forex. Upon seeing the example ads below, we signed up straight away.
Then what was promised did not happen. So what happen! We will go out screaming forex is a scam. Designed to swallow your money.
Why does this happen!
It is because we took to forex as a gambler rather than as a trader. A trader does not speculate, he let the market show him the probability of what is going to happen next.
Yes, probability! Why probability? Because we are not in control of the market. Even all our analysis pointing toward that particular currency pair has high probability of going upward, it may on contrary go down. This is exactly the reality of forex trading.
So how does one become successful forex trader.
Tips To Become Successful Forex Trader
We enter into the world of forex trading to make money. In order to make money, we must become successful in trading. So what do we need to do to become successful? Continue reading and l will share with you my personal experience and tips from other sucessful traders.
Start Trading Live
You don’t make money if you don’t start trading on a live account. But how do you get started? How would you prepare yourself to go live? Here l am sharing some basic steps to prepare yourself to go on live trading.
- Get a forex chart – open demo account
- Learn the trading system
- Increase demo account value
- Open micro lot trading account
- Add fund to your trading account
I will now elaborate more the above steps in preparation for you to go on live trading.
Get a Forex Chart – Open Demo Account
You will need to sign up with a reliable broker (l have live trading account with ICMarkets) to open a demo account and get a forex trading chart – MT4 (Meta Trader 4). You will need to practice on how to trade with MT4 – the most popular trading platform.
Learn how to place a trade, market entry, pending entry, stop loss and take profit. Learn how to draw support and resistance level and trend lines. Learn how to maneuver within the platform. The last thing you want is when it comes a time to place a real trade and you are stuck or make beginners mistake.
Well, l experienced some challenges when l was placing a pending order (order to buy or sell currency pair at predefined price reached in the future). I keyed in stop loss price at the take profit section and take profit price at the stop loss section. As a result l was not able to submit my trade. It took me awhile to realize the mistakes.
Imagine if you are going to place a market order (order to buy or sell currency pair at current market price) immediately upon opening of a new price, making the same mistake l made could result in you losing a trade.
In forex trading, speed in execution (placing a trade) is very important. The price of certain currency pair could move far away from your intended market entry price within minutes. This could be a stressful part of trading.
Nowadays, l mostly place pending orders and find this less stressful and avoiding making silly mistakes. So play around the trading platform (MT4) is important.
Learn The Trading System
Many traders hop from one trading system to another. There are reasons for doing that. The traders hopped because:
- The current system is not suitable with trading personality.
- They were looking for a perfect system – the holy grail of trading.
- Traders were exposed to too many system available in the market. Each promising great profitability.
In your early stages of trading, it is quite normal to be hopping from one trading system to another. You need to find out which system is suitable for you. You may be paying for the system or you obtained it free of cost from the internet, You need to do back testing (learn how it performed in the past). Once you are comfortable with certain system, Continue to trade it on your demo account to see its performance. You need to give the system sometime to run to determine its reliability. After all what you want is to be profitable.
Whle trading on your demo account, pay attention to losers. You may want to analyse why you lose this particular trade.
I have tried not less than 10 trading systems. Finally, l have settled on one, i.e. forex price action strategies (by DPA) with support and resistance levels as guide to enter and exit the trade.
Increase Demo Account Value
To become a successful forex trader, you need to trade on demo account until you are consistently make a profit for between 3 – 6 months.
By now you may have settled down with 2 or 3 strategies. So now is the time to test your strategies and your personal trading plan on a demo account. You want to learn how the strategies perform under different market conditions.
In order to do effective testing, you may want to trade on demo account under similar condition as you would trade on a live account.
You fund your live account with a $1000.
You risk 2% of tradeable fund per trade — so your risk is $20.
For the currency pair you trade you determine your stop loss to be 20 pips
Cost per pip = $1 ($20 / 20 pips)
With this, you are able to trade 10,000 lot size for $1 a pip (assuming you trade EUR/USD).
Under different condition, where your stop loss is 100 pips
cost per pip = $0.20 ($20 / 100 pips)
Now you are able to trade only 2,000 lot size for $0.20 a pip (assuming you trade EUR/USD).
By entering your trade similar to how you would do on live account, you are also putting your emotion to test. Remember in trading, there will be losing trade. You must condition yourself and manage your emotion everytime you lose a trade.
Sometimes, you also have to manage your emotion when your trade is on its winning path. More often than not, before the trade reach its ‘take profit’ target, our emotion runs high and our itchy hand went to close the trade.
Yes, at time you need to close winning trade before reaching its target, but that’s done because of certain event like major news release etc. To be successful and profitable, we must let the trade run until it reaches its target.
So not only we learn how to trade, but most important is we must be able to manage our mind. So Practice! Practice! Practice!
Open Micro Lot Trading Account
A few months down the road, you have tasted the adrenalin of forex trading. Many months of training and you have shown profitable in your demo account. You are now ready to trade with your money.
You are advised to open a micro lot trading account, sometimes called cents account. You only need to fund between $200 and $300 to start trading.
Why micro lot trading account? You are now trading with real money, money that could be use to pay bills etc.
Trading with real money is totally different from trading with a demo account. Your emotion could run high and you may cut short your winning trade. The worst that could happen would be when your winning trades turn into losers. Believe me, this will greatly affect your believe in trading strategy. As a result, you may decide to change strategy.
To be successful, you really need to check your emotion and accept losing trade. The earlier you do that, the better you would feel. Your confidence level will return fast. You should not change profitable strategy so soon, just because of a few losing trades.
Normally, l would stay away from the trade for a few days, just to rebuilt confidence.
However, if your initial fund starts to grow steadily, you can now move to the next step.
Add Fund To Your Trading Account
You have progress steadily. You are in control of your risk, your emotion, profitable startegy, you are ready to trade more currency pairs. With $200 or $300 fund, you may only be able to trade 2 currency pairs (depends on stop loss order).
By reaching this step, l would envisaged that you have been trading, both demo and real money for about 12 – 18 months. Your confidence level has increased. Your confidence tell you that you are not going to blow your account. So you are now looking to increase your stake to make more money.
You should add fund to your account slowly. Do not throw in all the monies you have at once because it will definitely create more stress for you, when you realised you do not have any back up fund.
So how much should you add? I would recommend a sum of between $500 to $2000. It depends on how much money you have set aside for trading forex. The amount you add each time should not be more than 1/3 of the money you have set aside for trading forex.
Once you are successful and profitable with the higher trading fund, you may consider adding more fund to your account and if you are considering making a living out of it. This is a concept of start small and work your way up.
In short, to become a successful forex trader, one has to have discipline. Discipline to follow your plan, strategy, risk management. Without discipline, you will not succeed.
Should you have any questions or comments with regard to trading forex, please input it in the comment section below. Your comment is greatly appreciate and if a response is required of me, l will respond as soon as humanly possible.
Risk Disclaimer: Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance. You could lose some or all of your initial investment; do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax adviser if you have any questions. Any data and information is provided ‘as is’ solely for informational purposes, and is not intended for trading purposes or advice.