Forex trading gives you access to one of the largest financial markets in the world. But to succeed in this venture, you need to learn a few things about the market before making your first trade. Here are five lessons you’ll need to learn if you want to be a profitable trader.
Studying is a Necessity, Not an Option
If you’re looking to make forex trading a career, you need to be comfortable with the fact that you will be studying and practising all the time. Fortune favours the bold, but you increase your success rate if you make informed and intelligent decisions based on facts and data.
You can certainly “wing it” in forex: trading the way you feel that day or deciding based on what your gut or intuition tells you. But that may work only for a time, and it may even lead you to disastrous consequences, meaning more losses than wins.
You need to study the market, keep an eye on the things that affect your trades, watch out for signals, and be constantly vigilant for opportunities and risks. If you want to take it a step further, then you can study how your currency pair performed in the last quarter or catch up on the latest economic news, as well as monetary policy shifts, and related events worldwide.
Having an eye for the factors that can affect forex also helps. These may seem insignificant or unrelated to the casual observer, but that’s what separates the great traders from the good ones.
There’s No “Best Way” to Do Forex Trading
The forex market spans the entire globe, with traders making thousands of transactions in an hour. With this many variables, it’s impossible to come up with a 100% foolproof way of trading. Yes, there are best practices to make trading easier, but there is no one formula or best strategy that will guarantee success all the time. And even then, finding the best trading strategy is completely subjective and differs per person.
One of the biggest reasons forex trading is so dynamic is that it allows for a wide variety of trading strategies. Each of these (or a combination of two or more) suits each trader’s particular style. These tactics rely on many things, from the data they have on-hand to their temperament. And what may work for one trader won’t necessarily work well for another.
Being in Control of Your Emotions is Important
Money talks, and when we listen to it, it can talk loudly. But your emotions may get in the way of listening. For forex traders, being in control of their feelings isn’t just for decorum: It’s a strategy in itself. It clears your mind and fixes your eyes, keenly, on the prize.
The forex market can change rapidly from moment to moment. If you’re looking to make a sizable profit, the difference between a reasonable return from a windfall can happen within minutes. While you have all the data you need, sometimes the only thing that’s standing between a loss and a return is a few minutes of being patient.
Losses Will Happen, and Risk is Always There
Let’s get one thing clear: there’s no such thing as “beating the market” with forex trading. The market is too big to beat, no matter how big your lots are or how well you study for your trades. But losing is always a possibility, and risk is constant.
Being comfortable with this concept is one of the biggest hurdles to overcome as a forex trader. Of course, no one wants to lose. But you have to manage your feelings and emotions if and when it happens to you. While losses may sting, you should learn from it and avoid a similar fate in the future. And while you can never completely get rid of risk, it’s possible to minimize it.
To Make Money, You Need to Spend Money
One of the biggest hurdles that any first-time forex trader will have to overcome is that initial capital investment into their live account. Actively putting in funds is a daunting task for any trader, no matter the size of their lot. But like all ventures, you need to spend to gain more in return.
However, it is essential to remember that you should only use funds you are prepared to lose and avoid putting in money allotted for something else, like payment for bills, college tuition, home mortgages, or amortization payments on property like cars or land.
Ready to take on forex trading?
These things should not scare you. Taking note of these pieces of information will make you a better trader. The forex market is teeming with opportunities to earn. And, with the advancement of technology, it has become accessible to almost everyone.
Talk to your broker now to get started on your journey in trading foreign currencies.