With no turnkey solution, operating in the forex market can be intimidating. Does that mean you won’t be able to make profit? Absolutely not! We have plenty of examples of influential people who, with their perseverance and grit, proved that the forex market can indeed be conquered.
The truth about the forex market is that in addition to just investing money in the market, there are other investments you are expected to make as well to be successful, such as; investment of your time, energy and determination. Ever heard the quote “There is no substitute for hard work” by Thomas Edison? Well, this saying is especially apt for the forex market which generously rewards its dedicated traders.
So, if you’re interested in forex trading and want to reap your fair share of profit, it’s quite likely that you have already scoured the internet looking for the perfect guide to rescue you. However, a dip on a few 5-minute articles with a handful of tips will never be extensive enough to teach you enough about the forex market. Keeping these things in mind, the currency trading expert, Fuad Ahmed, has created an in-depth guide of 4 secrets that will lead to successful forex trading.
1. Preliminary self-assessment
Most people dive head first into the forex market without first giving attention to what works for them and what doesn’t. Doing a preliminary self-assessment is crucial in every walk of life, especially in the forex market considering the level of risk associated with it. So before trading even one cent in the forex market, be sure to learn about yourself. What does this mean? Trading in a forex market is as open ended as it can be, with plenty of methods to choose from and some being more popular than the rest. However, initially giving thought to the popularity of a trading method isn’t imperative as a trader should opt for the method that works best for them.
For example, if you choose to go for a long-term trading method which requires you to keep positions open at night, do you think you’re the kind of person who’d comfortably go to bed, knowing valuable investment is on the line? If not, then such methods will only agitate you to a point where you’ll incur losses. Your best bet in this scenario is to steer clear of methods that will hinder your performance and choose the ones that seemingly work for you.
In case you are still uncertain, then learn through trial and error.
2. Make sure you can trust your broker
Having a credible broker is imperative to becoming a successful forex trader. So, when you go hunting for a broker, keep in mind how important it is to pick the right one and be sure to take adequate time to do your research. Think of choosing a broker as investing in a real estate market. No one goes to a real estate agent and purchases the first property he’s shown. So, apply the same principle here and do an extensive background check and once you have filtered down the pool of candidates, compare the chosen brokers based on the platforms they use and whether those platforms are adequate to optimize the practices you utilize.
Make sure your broker is licensed. However, bear in mind that not every license is credible. There are some offshore licenses which are practically of no use and aren’t going to do you any good. Let’s assume that you get into some sort of trouble with your broker with an offshore license. How do you plan on requesting your money back when you don’t have a legitimate platform to file your complaint at? In truth, just contemplate how troublesome would it be to ask for a reimbursement from an offshore platform while keeping in mind that forex trading is not regulated in every country. If you found yourself horrified at the mere thought of that, ensure beforehand that your broker is licensed by a well-reputed authority such as the Financial Conduct Authority (FCA).
3. Choosing the school of thought
Primarily there are two schools of thought that forex traders revolve around. The first one being the technical school of though based on the idea “The trend is your friend”. The key ideology behind this methodology is the idea that there is always a factor that leads to the movement of price in a certain direction. If price is increasing today, in the absence of other factors it would be unlikely for the price not to increase tomorrow as well. By making use of certain charts and indicators, you can determine the trend of the price.
Second is the fundamental analysis school of thought, according to which the biggest factor determining the price of a currency is the news being broadcasted about its country of origin. So, if you were utilizing the latter, you’d be looking at yesterday’s news, instead of yesterday’s trend. The pundits of these schools of thought battle for supremacy on which ideology will succeed in the trade.
So, now that you have a clear picture of the two methodologies used by forex traders, choose one that you think will work best for you and be sure to be consistent with it.
4. Maintain a trading journal
With most brokers providing real-time trading records, forex traders shirking from keeping a trading journal is far from an anomaly. However, one drawback of these automated journals is that they don’t catch everything that is required to keep a trader well informed. So, even though some traders avoid keeping a good old journal, there are plenty others that can’t go without maintaining one.
By having a journal, you are able to remember imperative details such as the currency pairs that work best for you, most profitable trade and frequency of past trades. This turns your journal into a personal guidebook, which can be accessed any time you are feeling unsure about making a new trade. Although, using a trading journal is an old school trick, you can’t go wrong with it. By jotting down your goals and trading expectations, you will be able to monitor your progress in a way more constructive manner.
It is a common misconception that trading journals are a lot of work. They are not, if you don’t make them to be. A simple excel sheet or a WordPress blog can do wonders in the pursuit of reaching excellence.
The key to operating in a forex market is to ensure to cut your losses. Although, losing a trade is seemingly the worst thing about making a trade, but it really isn’t, if your loss is manageable, small and insignificant compared to your net worth. If you have found a way to make profit in the forex market, then that’s amazing. However, be sure to look for a strategy to cut your losses to survive in the volatile forex market. For new entrants, the above guide will be the most comprehensive set of tips they will come across in their pursuit of being a successful forex trader.