Introduction
Forex trading is one of the most common and mainstream forms of trading. That’s not to say it’s any easier than other types of trading, such as stocks or cryptocurrency. In fact, forex is one of the most misunderstood trading markets. The reason is that whilst you may see someone on Instagram who has a fancy sports car, an apartment in Dubai, and sponsored posts saying they earn $30,000 a day, that’s not how it works in real life. Becoming a successful forex trader can take years of hard work, research and unsuccessful trades.
We aren’t suggesting forex trading isn’t profitable. When it is executed correctly, it is a profitable way of making money. There aren’t any guarantees, though. It can be an extremely turbulent market. However, we’ll give you the tips and tools that successful forex traders use. We have more information if you want to read a piece comparing forex and cryptocurrency. We will also explore the strategies and blueprints a professional forex trader would use in their trading psychology.
When deciding what makes a successful forex trader, the obvious question is how much does a forex trader make? This isn’t easy to answer, as different traders use alternating amounts of capital, so the figures can fluctuate wildly. If a forex trader is trading on behalf of a large institution such as a pension fund or investment bank, they will earn millions of dollars a year and handle accounts worth billions of dollars.
What Is A Forex Trader?
A forex trader is somebody who buys and sells currencies. The main strategy involves attempting to profit from fluctuations and volatility in the market. Generally speaking, there are less than a dozen major trading pairs, most of which involve the US Dollar. Due to the number of international currency pairs available on the market, the market never closes. However, it is more advisable to trade forex during high-volume hours. This will guarantee that liquidity is available so you can execute your trade.
Liquidity is required to ensure you receive your money when you execute a buy or sell order. You can trade earlier in the morning if you work during normal office hours. You can also trade later in the evening, depending on your preferred market. If you’re starting as a beginner, there are a few things we would strongly recommend before you start trading.
Use Automated Trading Software
Back in the days before computing completely revolutionised the way traders operated, all trading was executed over the phone using a broker. However, now you can use top-of-the-range trading software to automatically execute buy and sell orders, removing any possibility of emotional trading. You need to ensure the automated software you use is highly recommended and top quality.
Emotional trading is when you allow anger or joy to smother your judgement and change your original trading plan. This is usually during times of high market volatility, and it is one of the biggest mistakes that beginner traders make. Even the best forex trader in the world would struggle to turn a profit if they allowed emotion to start dictating their strategy. You may also see this type of trading referred to as algorithmic trading.
Try Demo Software
If you’re looking to begin trading for the first time, we recommend using demo forex trading software before using real money on live markets. You can use demo software to your advantage and learn how to manage losses without losing money.
It is important that you know how the markets work and the sort of things to look out for. This should be part of a bigger strategy where you do enough research to be competent to use your money on currency trading markets.
How To Become A Forex Trader
This may be more straightforward than you think. A misconception people have when it comes to trading is that you need to go to a top University or have top qualifications. This isn’t the case. Of course, you can go through higher education and University to become a trader full-time. However, in today’s world, with such readily available access to the internet, all you need is an internet connection, a phone, and a bit of money to get started.
So the key isn’t to become the best forex trader in the world. It is all about how to become a profitable forex trader. A profitable forex trader is a successful one, irrelevant of whether it’s $1,000, $10,000 or $100,000. If you’re in the green, you are doing something right.
The best forex traders all started somewhere. For anyone just beginning their journey into the trading domain, the first market to start with is usually any market containing the US Dollar. This is because these markets contain the strongest liquidity due to the strength of the American Dollar. Including pairings with the Great British Pound, the Australian Dollar, the Euro, the Japanese Yen, as well as a Canadian Dollar pairing.
Suppose you study the market meticulously and follow current trends and chart patterns. In that case, there are other pairings you can trade that provide considerable amounts of liquidity, such as the Euro & The Great British Pound (EUR/GBP), the Japanese Yen and the Euro (JPY/EUR) and The Swiss Franc and the Euro (CHF/EUR).
Finding your feet with common currency pairings is advisable before wandering into lesser-known international pairings. Getting to know the market by trading USD/EUR is usually the best course of action. More complex strategies, such as margin trading, require more knowledge and research.
Not only is this the most popular pairing among forex traders, but there’s also vast amounts of information you can find online that may indicate which way the currencies will head. You can set buy and sell orders, so they execute automatically. This means you don’t have to sit there checking charts and constantly looking for the next opportunity.
Key Things To Remember When Becoming A Forex Trader
So just to give you a brief rundown of what is the best advice if you’re just finding your feet in the market:
• Ensure you set yourself up with automated trading software so you can remove the possibility of human error due to emotional trading. You can also execute trades whilst you’re busy doing other things, giving you more time to get on with your day whilst earning passive income.
• Try to execute your trade near peak hours or when there is a high volume. This ensures enough liquidity in the market to close your trade properly and receive the money as quickly as possible. There is no guarantee that the market will fill an order at your requested price. Especially if the market is experiencing extreme volatility and price fluctuations, this can seriously impact liquidity.
• Just because the markets never close doesn’t mean you shouldn’t. Don’t become obsessed with small price differentials, especially if you have done your research and want to set up a selling price. It would help if you didn’t allow emotion to cloud your judgement. It is advisable to set a sell limit to manage losses or extreme price volatility.
• You aren’t going to become a millionaire overnight. Unfortunately, some people believe that there are get-rich-quick schemes in today’s society that can guarantee huge, instant returns. However, that isn’t how forex trading works. Take your time, be patient and perform your due diligence, and you will stand a much better chance of making a profit than someone who fails to do any of these important initial tasks.
The Keys To Success
Many professional forex traders will tell you that trading on emotion is one of the biggest and most common mistakes. If you can use this as your starting point, you can begin navigating your way around the trading world more confidently.
You aren’t going to be the best forex trader in the world overnight, and you will make mistakes. The big question is how you learn from those mistakes, so you don’t find yourself repeating the same ones.
Ensure you select the best currency pair. If you’re a trader based in the UK, who knows the price fluctuations between the GBP and USD, it wouldn’t be the best course of action to start trading Japanese Yen without any prior research. Although this should go without saying, there are people out there who will be drawn into forex trading for the wrong reasons. Some people see it as a lucrative and quick money-making opportunity.
Conclusion
Whilst you can earn a lot of money trading forex, you also need to make sure you’re doing huge amounts of research. This includes before you make any investment and whilst your position is live. Ensuring you’re giving yourself the best possibility of making a successful forex trade. When it comes to being a top trader, forex can provide the sort of income that allows you to work solely from your mobile phone or laptop. However, it takes a lot of expertise, practice, and a little bit of luck.
Even by applying successful strategies and following the advice of successful traders, you can have the best will in the world, follow all our tips and strategies in this article and still potentially come up short. This is the way of any trading market, and this isn’t unique to forex. It also applies to all other markets, such as stocks, cryptocurrency, and commodities.
Although forex trading can lead to sizeable profits, it can also lead to serious losses. Ensure that you understand how to manage them accordingly before putting your capital at risk.
Start small and learn the craft as you go along. Implement a strategy where you consistently have buy and sell orders. This may sound excessive, but having the ability to manage your profits and losses automatically is key. Not having to check your account is far more beneficial for you in the long run. As you continue to pick up knowledge along the way, you can operate more confidently in the market. In addition, as you become more experienced, you could well be on your way to becoming a success.
