Learn Forex Trading – How YOU Can Become A Successful Forex Trader
Forex Trading is not for the fainthearted, but if you are here, that means you are willing to learn and we are here to teach you how to become a successful Forex trader, what strategies you might find useful for a beginner trader and what trading principles you should be using to become consistently profitable in the ever so volatile Forex markets. Even If the individual is a beginner trader you will find a lot of FREE value inside this article, so I hope you enjoy our efforts, make sure to share it with your friends!
What Is Forex Trading?
Forex trading is also known as currency trading, FX or foreign exchange in full is a decentralised global market, where every currency pair can be traded in the world. Sounds amazing right? The Forex market is HUGE and its daily trading volume exceeds a amount of $5 trillion dollars. ever traded stocks, you may combine all of them and it would not give a remotely close number to Forex. That is how big it is, and when big money comes to play, there’s a lot of potential to make big money in Forex trading.
Types Of Forex Traders
Most of you reading this article will be a personal trader, what I mean by that is you trade for yourself, you have your own capital and make money on your own, all the returns drop in your pocket, rather then some professional people that are trading for the big banks of the world, that have account sizes of millions.
Professional people tend to have huge lump sum of money and with that they can manage their risk effectively earning around 30% annually on a good year. On the other hand traders such as myself and many of you reading will be risking their own capital and although brokers have leverage it has been recently lowered down to 1:30 which is considerably lower then what it used to be 1:200+.
Although its not all doom and gloom, different brokers, different countries will have different types of leverages, meaning that even if you have a considerably lower account than professional traders, you are able to trade the foreign exchange markets, because essentially the broker borrows you cash to trade.
Keys Factors To Becoming Successful In Forex Trading
1. Finding The Right Currency Pair
Finding the right currency pair to trade and stick with it helps especially for a newbie Forex trader. All currency pairs have a different mind, some pairs are really volatile, some pairs are trend driven, some are very slow and sluggish and spike up randomly or only on fundamental events, the reasons are limitless, but if I could recommend pairs to trade it would be these:
- EURUSD – Main Traded Currency, a lot of volatility
- USDJPY – Tend to trend quite a lot and like round price numbers
- GBPUSD – This is my personal opinion, but probably the easiest pair to trade
- USDCHF – CHF is a safe heaven and is highly influenced with fundamental risk
- USDCAD – CAD highly depends on OIL prices, they correlate with one another
- USDAUD – USDAUD AND USDCAD usually move together quite nicely
I would also mention trading the Euro market such as EUR/GBP EUR/JPY & EUR/CHF could be a nice alternatives if you want to diversify or find more opportunities, although its less volatile then the USD, its still quite nice currency pairs which we cannot simply ignore. Personally I have made most of my pips through the AUD and GBP pairs, trading the USD against them in the Forex markets.
2. Having The Right Mentality
Its very important to have the right mentality when trading Forex. You need to expect and accept the fact that all your trades won’t be winners, and sometimes its really hard to do. Especially when you have a winning streak of 2-3 weeks gaining consistent profit. Some weeks it all goes wrong and its okay, if people money managed their accounts correctly and did not make impulsive trades to regain their lost capital, they will make and gain the money back on the long term basis.
I have spoken to a lot of Forex trading experts and this is easier said then done, some weeks months it feels like groundhog day, every week is the same, one week we are winning and next we are losing what we have won, but if you grind through and know that this is part of the Forex game eventually you will see success and break through this chain.
Another thing is very important when trading Forex is to never be emotionally invested in the trade. If the trade you have placed fails or wins your reaction should be the same. Being emotionally invested means that either you are trading too big of a lot size trade and you are risking more then you can chew, basically you are gambling if any adrenaline is pumping in your veins.
So a good rule of thumb is to stick to low risk trading and by low risk I mean something around 0.05 lot size, a very small lot size amount where you can sleep comfortably without thinking whether the trade will win or lose, but yet is still interesting for you to learn, that is the sweet spot. You don’t want trading to be boring, but you don’t want to stressful especially when you are learning the ropes. Everyone deals with risk and emotions differently so try to increase or decrease the lot size for optimal trading education and experience.
3. Trading Plan Is Important
What is a trading plan? Well its a written document by yourself of rules that should never be broken when trading Forex, and you really need to enhance your discipline with this one. Most people are emotional traders and adobe 80% lose money when trading currencies, that is why its crucial to have a decent plan and stick to it.
Most mistakes I have seen Forex traders make is they write their rules down and not follow them. If you do not follow the rules of your trading plan its a sure one way ticket to blowing your brokers account balance.
Here is a example of the main things you should be asking yourself when you want to place the trade and the rules you should follow:
- How much I am willing to risk?
- Is the price level at a area of sensitivity?
- Is there a indicator confirming a entry?
- Bearish or bullish engulfing candle close?
- How long I am willing to stay in this trade?
- Will I close trades every week?
- Reason for the trade, it has to make sense?
- Is there are fundamental news prior to your trade that could change your analysis?
- Time you should be trading? Are you day trading, swing trading, scalping?
- How much is your maximum draw down for the week?
- How many maximum trades you will I be placing
- How much equity do you want to earn annually?
- Would I take this trade if I had a capital of a $1,000.000
This is only a example of questions you should be asking yourself, everyone has a different plan so really you should not copy anyone, but maybe searching for a template just to start on the right foot would be the most ideal scenario.
4. Choosing The Right Trading Strategy
So having the right trading strategy for Forex trading is very important. Its your go to method to good entry in the market and start generating pips. So you need to find yourself something simple and easy, I personally recommend learning price action, areas of sensitivity and how to draw trend lines properly.
Although price action seems simple enough, most people get it very wrong. They draw incorrect support and resistance lines, trend lines, and because people draw them incorrectly they gain the false signal to enter the market, when its the wrong time to do so.
So taking time and learning the fundamental basics of trading is much more important then going through YouTube and trying a million strategies and keep changing them every week once it backfires. Even if you find a strategy on YouTube that you think could work, you need to back test it for at least 6 months to gain knowledge whether it actually performs well.
I personally love using price action and the moving averages of 20 and 50, they seem to react great as a support & resistance levels, if you have not seen the video you can find it here on my YouTube Channel : HERE
5. Being Able To Adapt & Make Changes
In Forex you need to be flexible with your decision making, there is no one way to do things. The currency markets always change and there is no one strategy that performs better then the rest. A Forex strategy that worked in 2017 could be the worst in 2020, so you really need to understand that losing is unavoidable and money managing your accounts, slightly fixing your strategy to adapt with the needs of the market is important to making money consistently.
A good trader successful trader will always try to find ways of improving his strategy, adding and removing things out of their trading plan, because at the end of the day its all trail and error until you start making money consistently. From my own experience you grind away sometimes thinking whether its worth it, and whether you will be a profitable Forex trader, but if you keep at it one day everything clicks and you become consistent and profitable on the markets, its not easy to do, but once you make it, its a blessing.
6. Keep Up With The Fundamental Events
To keep a consistent Forex trading record that is gaining positive account growth, you NEED to be aware what is happening in the world, meaning you need to read articles and understand economic calendars like your own 5 fingers. Its not rocket science if you put in the work, and generally its just all discipline. Personally I wake up in the morning and its one of the first things I glance through to just know whether I should be trading today or leave it for another day.
I am not telling you to not trade during fundamental events, because that is simply impossible, but if the news is the non farm payroll, which is considered the most volatile news out there, you might want to close off your trades or have them low risk just to avoid the unexpected. Saying that sometimes the markets leave good clues about what the news outcome results will be, then you may want to trade it and make some quick pip gains.
7. Having The Right Broker Helps
One of the worst things that can happen especially to a beginner trader is they choose the wrong broker. Having the right broker that is regulated with good customer support can generally enhance your trading. Some brokers have great tools such as: strength indicators or are partnered with Forex news providers that allow you to access fundamental information quickly to see what is currently happening within the Forex markets.
If just starting out definitely invest some time and energy by searching for appropriate brokers, it will make your life much easier and will also keep your mind at rest, when you have funds inside your account balance. Most great brokers have nice spread differences and deals which other brokers do not provide, so its always worth searching for the best one.
You may want my personal recommendation I love AvaTrade. I have been using this broker for couple of years now and never had any major issues: such as lag or contacting their customer support, here the link below.
8. Learn To Accept Loses On Real Account
This is probably the hardest thing to do when trading Forex. We all trade Forex with the intention to make money. So after you have tested your strategy for over 6 months and you believe the strategy has proven you it works, you may open yourself a real account.
Now if its your first time trading with a real account its a straight up game changer, since its your own real money you will be much more invested emotionally and this could cause you to make or break.
Generally people that lose will over trade their accounts and get stopped out by the Forex markets, this could be because of the lack of margin in their account or simply not following their trading plans and taking to many trades at once, with different risk sizes, if you start doing that STOP, because you are gambling.
Forex trading is a patience game with risk management, if you want to make money within the currency exchange you need to forget your emotions and just follow your trading plan like a robot.
9. Forex Trading With Consistent Lot Size Trades
When trading Forex generally you want to risk the same amount on every trade you place, the reason is simple, if you developed a strategy that performs better then 50% on the long term basis you will make money with just managing your risk profile.
If a person keeps trading inconsistently then they may incur a bigger loss then expected due to the sudden increase of risk, this will make them trade blindly which will result in trades having bigger or worse results, its especially important to not chase trades or double up in Forex.
having a trading plan, you need to look and follow its rules like some cult. For example if a trade lost recently, do not double up the lot size to potentially make up for what you have lost, although in theory it sounds great, but when used in practice this is a sure recipe for wiping your account clean of capital.
10. Use The Right Tools To Make Life Easier Forex Trading
A successful Forex trader will always have his favourite couple of tools which he uses daily to keep his consistent results. Some of the tools maybe websites with economic calendars, some may use online volatility indicators, which shows what currencies are performing well on the daily, weekly, monthly & yearly basis.
There is also a cool website called “barchart” which has a lot of useful information for free, they even incorporated Forex signals, however I would personally only use them for a direction of what the indicator are doing, you would still have to analyse and understand price action to get a good entry, because indicators are lagging and only show a price in a different way.
If you have been trading Forex you may have heard of “Metatrader4”. This is a trading platform that can be used to trade on, but more importantly this is where you could potentially test out your indicator strategy, your price action and develop your trading plan though testing past market conditions and see whether your strategy works.
Although passed events are not a indicator of future success, testing out on “Metatrader4” and giving yourself a rough idea what your strategy results may most likely be, will save you time to find a fairly profitable strategy, once found you can incorporate price action and fundamental news events with your strategy to potentially start a live trading session on a small account and begin learning how to trade with small amount of money.
11. Forex Trading – Bad Ideas Newbies Believe Are Good
Some newbie traders that are wealthy may start trading Forex with a HUGE capital, without a trading plan, only because they believe they are a born Forex trader and do not need to put in the work.
Their mentality is: “If I have a huge account it will be easier to make $100 a day and it will be harder to lose it. While I believe having a huge trading account is a little easier to make money, because you have a bigger margin, that really does not mean you will build your cash capital at all.
Its actually even more risky to have more money, because likely a newbie trader will risk his account to make this “$100 dollars everyday” and one day the Forex markets will turn around and swipe a huge chunk of his account away. Not to mention if folks trade big lot sizes they will incur bigger swap charges, and spread difference will feel like you are already loosing a lot of money just from entering a trade.
If you are a newbie trader and you place huge lot sizes, you will lose all your hair within couple of days, because you will see numbers that are negative from the gecko due to spread difference, even though the market has not yet had time to develop and push towards the direction you placed a trade.
That is why its very important to understand that Forex is a long term game, you need to learn discipline, you need to have a plan of action and strictly stick to it. Over 85% of people fail trading Forex, because they come in with the mindset that they are the 15% that are profitable.
You need to put in the grind to become a profitable trader, heck it took me 5 blown accounts and 3 whole years of eye watering charts till 4 am every single day to become a profitable trader, but its definitely worth the journey. Its been now 4 years since I have been making money consistently from Forex and I could not be happier, looking back at it though, I realise why so many people fail trading Forex.
The Bottom Line On Forex Trading
Forex Trading and becoming successful is pure hard work and only the dedicated will prosper. If you have the will and the discipline to stick with the Forex tips I gave you, you will definitely have a good chance to become a profitable Forex trader. The dream is real you just have to put in the work to do it and when you want to quit just remember once I was in the same shoes you are in, so good luck, stay disciplined have fun and act today!