Successful forex traders are not born, they are created. Many entrepreneurs dream of becoming independent and profitable traders but some people do. Why is a successful Forex trader so difficult? Some traders prefer the thrill of trading but in reality, trading is much more than just gambling. If you have a detailed business plan, do your analysis regularly, and manage the risks, you are halfway to success. We have listed what it takes to be a successful Forex trader.
Step 1: Identify your mistakes
The first step in improving a subject is to identify your mistakes. The same thing applies to forex trading. You should honestly ask yourself some critical questions before moving on to the next step.
Re-evaluate your trading strategy: Do you have a written trading strategy that covers all entry and exit rules for your business? Are you confident in your business strategy and do you follow everyone in T? Your business strategy must be comprehensive, effective, and complete.
Reset your initial investment: Trading should only be done with the money you can lose. It is not only a bad idea to open your trading accounts with your life savings, but it will also create an emotional burden that will effectively prevent you from trading.
Redefine your risk: Success in business comes down to your risk management skills. You must have a pre-determined risk for the trading margin and stick to it. This way, you can reduce your account loss or multiple money losses.
Don’t spend too much time on a demo: After months of practice and trading, if you still have a demo account, it’s time to switch to a real account. Start with a very small real account. Most brokers accept initial deposits as low as 100 or less. Your goal is not to make a fortune from it, but to trade in very small positions (a few cents per pip) and gain a sense of the true market. Not having a risk in a demo environment can affect the size of your business and the size of the position you take, which will not be directly taken into account.
A great way to identify your weaknesses and get better at business is to create a written trading plan and keep a trading journal, which I will cover in the next step.
Step 2: Design a plan to correct your mistakes
Once you have re-evaluated your trading strategy and identified all possible trading errors, now is the time to correct them. The following steps will help you achieve just that:
There is a written trading plan: Probably the main reason why so many traders fail in trading is the absence of a trading plan. Without a business plan, you have no idea where to enter and exit the market, what position to take, and how to manage a lost business.
A trading plan is a written plan about how you go about trading. This helps you focus on the rules you need to follow, which will reduce the impact of emotions on decision making. Your trading plan should include at least your trading strategy, entry and exit points, a risk to reward ratio, position size, and the rules of money and risk management.
Choose just one trading strategy: There are many trading strategies in the Forex market. Many startups move from one strategy to another, which only increases the risk of doing business wrong. Instead, you should choose a strategy and stick to it. Decide which strategy might work best for your business style. Do you want a scalp, day trade, swing trade, or position? Each style requires a different approach to trading and conducting trades at different times.
Following multiple strategies splits the time you can spend learning. The bottom line is that there is no strategy that is always profitable. This is the way you manage activities and follow the rules of your operations plan and money management which makes all the difference in the bottom line.
Manage your trades: You need to manage these regularly when you have open trades. Is your initial trading setup still intact or has the currency fundamentally changed? The way you manage your management will have a big impact on your bottom line. It may seem obvious to cut your losses and continue your profits, but many traders do not apply it. Also, if you are unsure about your business strategy, you will have a hard time managing your business first. Confidence in exit points comes with confidence in your strategy.
Always use stop loss: Using stop loss is an essential part of successful trading. You never know what the market will do next and you want to have a safe pillow when times get tough. Always set your stop loss based on market conditions and keep in mind that your stop loss level determines the overall risk of a trade. Your stop loss also affects the size of your position and not the other way around. By setting your stop loss based on market conditions, you will determine the maximum position size that you can trade to stay at your preset risk per trade.
Have a daily trading routine: Your trading day should begin with a look at the important market news and data that will be released that day. Unexpected reports have a huge impact on currencies and can ruin your trade setup, even if you are a purely technical trader. Political and social factors can also have lasting effects on a currency’s exchange rate. Always follow the market news to stay up-to-date on key developments in the Forex market. Learn about Forex Market.
Make entries in your trading journal: A trading journal is simply a place where you write down the trades you take, including other important information such as entry and exit points, size of position used, entry trigger, and profit/loss. Regularly reviewing your journal entries can help you identify your weaknesses and improve your operations.
Keep practicing: You need to spend long hours on the charts and the screen to get a feel for the market and price fluctuations. The best way to do this is to follow the market regularly. Pay attention to the various trade setups and how to market news and reports affect exchange rates. Follow your business strategy and try to find as many business opportunities as possible.
Don’t waste too much time on demo trading: Trading a demo account is a must for new traders, but don’t fall into the trap of wasting months on demo trading. There are many benefits of demo trading, but real money trading is where you will find out how it performs. Newbies to the Forex market struggle to perform perfectly on a demo account, only to find that they cannot handle the emotions associated with making or losing real money.
Demo trading does not involve any risk, which creates a very different trading condition than real trading. Try to spend a maximum of three months on a demo account, depending on how fast you learn and how you’re trading strategy is performing. It must still be profitable on a demo before it goes live, although that doesn’t mean you’ll see the same results on a live account. On the other hand, if you can’t make money from demo trading, you certainly won’t make any profit on a real account.
Step 3: don’t deviate from your plan
Once you have finished your entire business plan, never deviate from it and start following it right now. Waiting for the right moment will leave you in your current situation forever, which means missed opportunities to trade and learn. Instead of procrastinating, you should act now! Start making your plans come true today and enjoy the feeling of having done something.
That is the sole purpose of a business plan. Without respecting the rules that you have written yourself, you will not be able to develop discipline in trading and all your previous trading mistakes will be repeated over and over again. Your trading plan should become a habit, so you don’t “shoot in the dark” when you trade.
It always takes a while to get used to doing something new, but once you start doing it, you will feel better than ever. Follow the market every day, keep learning, and keep your goal in mind. In this way, you are already ahead of the game.
These are some of the key principles that you must adopt to become a successful trader. They are easy to follow, but many traders lack the discipline to adhere to them rigorously. Staying disciplined when trading is one of the most important aspects of trading that you should develop from the first day you decide to trade.
There is no teacher without experience, and experience comes with practice. Like anything else, currency trading is a skill that can be developed over time.