Becoming a professional trader in the Forex market is very hard. If you look at the statistics, you will be surprised to see that only 3-4% of investors can make a profit in the Forex market. The majority of the traders are having trouble because they don’t know the perfect way to assess the risk factors. Some of you might say that due to the problem of undercapitalization the traders are losing most of the trades. But this is not completely true. If you ask naïve traders a few basic questions about trading, you will not get a satisfactory answer form most of the newbies. A lack of trading knowledge contributes a lot to the number of losers in the Forex market.
Now, let’s come to the point of successful traders. How can we become a successful trader in the Forex market? Well, the preparation to become a successful trader is a very lengthy process. But if you follow the steps in this article, you can expect to become a skilled trader in less than six months. Let’s learn the key steps that you must follow to prepare yourself as a professional currency trader.
Trading is a business
The first thing that you need to know is that trading is just business. If you want to make a quick profit, trading might not be a suitable career for you. Just like any other business, you have to spend time mastering your trading skills. Accept the fact that you can’t make a profit without having a good understanding of this market. You must learn the three major forms of market analysis. These are-
- Technical analysis
- Fundamental analysis
- Sentiment analysis
Learning technical analysis is not that hard. However, getting into the detail is the most complicated task at trading. Once you get the idea of technical analysis, you might think you know all the details of this market and are perfectly ready to trade the real-time price feed. But things are not as easy as it seems. You need to focus on the fundamental analysis too. By studying the major news, you can easily execute high-quality trades and improve your trade execution process. Once you are skilled at fundamental and technical analysis, you will slowly start to understand the sentiment of this market.
Some of you might think after learning these three forms of market analysis, traders are ready to secure their financial freedom. But that’s when the real hassle will starts. You have to focus on the demo trading environment to develop your skills.
Open a demo account
After understanding the basic idea of the three major forms of market analysis, traders need to focus on the development of their skills. Some naïve traders start trading the market with real money. This is a big mistake. To become skilled at trading, you should use a professional Forex demo account. Brokers like Rakuten are offering free demo accounts to retail traders so that they can learn the art of trading without losing any money.
So, how long you should demo trade the market?
Well, the answer greatly depends on a trader’s skill. Usually, it takes 3-6 months to develop a unique strategy that can be used to trade the real market. Most of the time, naïve traders become emotional after winning a few trades and they start trading more aggressively. After switching to the real account, they start losing money. You might think you know all the detail, but still, you should demo trade the market for at least six months.
The confident stage
Rookie traders become extremely confident with their approach after winning some good trades. They think they don’t need to learn anything new. Some of them think they have the perfect trading strategy in the world. But things shatter when they start losing real money. Having confidence adds great value to your learning edge but this doesn’t mean you will succeed if you have false confidence. To become a good trader, focus on long term goals and try to improve your skills A few good trades doesn’t mean you are the hero. Unless you can make a consistent profit in the demo environment for six months, you should never think of trading the real market.
Finding a reputed broker
After developing your skills by using the forex demo account, you need to find a reliable broker. Some of you might think that choosing a broker with an extreme level of care is just a waste of time. But did you know unregulated brokers might even scam you? After trading the market for a few months, you will realize the importance of having access to a premium trading environment. For instance, traders will face heavy slippage with low-end brokers.
Most importantly, the trades will not be closed at the desired price level since some of the low-end brokers manipulate the price feed. In other words, they will hunt the stops. Even if you manage to make a profit, it will be tough to withdraw the profit since they will always impose fancy restrictions. This will never the case if you chose to trade the market with a well regulated and reputed broker.
Develop your trading routine
You must have a trading routine to trade the Forex market. Those who are trading the market without having a routine always lose money. They are making a big mistake since they don’t know how to trade this market in an organized way. To become a skilled trader, you must learn to focus on long term goals. Forget the fact that trading is all about finding the best possible trades with high risk. It’s more about finding good trade setups and securing consistent profit with low risk. Things might be hard at the initial stage but once you learn to trade in an organized way, you won’t have trouble.
Note down the mistakes
Being a new trader, it’s obvious that you will make some big mistakes. Some conservative traders often manage to avoid major mistakes by keeping and following a trading journal. Does this mean we can avoid the losing trades just with the help of the trading journal? The obvious answer is no. To make consistent profit from this market, you must improve your trading skills on a regular basis. Note down the mistakes in your trading system and try to improve your skills. Losing trades are always appreciated but you must learn new things from those losing trades. Bring the necessary changes to your trading strategy so that you don’t have to lose money again as a consequence of the same mistake.
Focus on the fundamental factors
Some intermediate and advanced traders often forget the fact that fundamental factors hold the key ingredients to creating volatility. Unless you are well aware of the news factors, it will be very hard to make a profit consistently. Most of the time, you will lose trades in the event of major news. But if you learn to analyze the fundamental data then you can easily incorporate your fundamental analysis into the technical data. Always remember, you need to use three major forms of market analysis to earn money.
The risk to reward ratio
To trade the market with skill, you must learn to find high risk to reward ratio trade setups. Those trading with a negative or 1:1 risk to reward ratio always have a tough time to secure profit in this market. On the other hand, the elite traders are easily covering the losses since they know the importance of managed risk trading. They never take too much risk in each trade and they always make sure the winners are bigger than the losers. Learn about the importance of risk to reward ratio because it is one of the most essential elements that can help you to recover losses.
Trade with the major trend
Trading against the major trend is one of the most common reasons why naïve traders are losing money. To prepare yourself as a professional trader, you must learn to trade with the major trend. The trend trading strategy always helps you to find the best possible trades. You will be able to reduce the number of losing trades to a great extent since the market tends to favor the trend most of the time. Instead of using a super complicated trading method, focus on a simple approach. Learn to use the basic trend line tool and use the price action signals to execute high-quality trades.
So, what is the price action trading strategy?
The price action trading strategy is one of the most effective ways to find the winning trade setups. The market is always giving a clue to the traders. Smart investors use different candlestick patterns to understand the language of this market. Based on the pattern formation they execute quality trades at the critical levels. Though learning the price action trading strategy might be a little hard for naïve traders it is the only way to reduce the hassle involved in trading. Once you learn this technique you can also execute high-quality trades, just like the professionals.
The approach of the professional traders
Professional currency traders are not executing random trades to earn money. They know the importance of quality trade execution. Unlike naïve traders, they are more concerned about the safety of their trading environment. Since they consider trading as their business, they can make big profits without any trouble. They never lose hope after facing a few losing orders. Losing or winning doesn’t matter as long as you learn from your mistakes.
The best thing about professional traders is their risk management skills. They never risk more than 1% of their account balance in a single trade. Does this mean they are always earning less money? Due to their strong analytical skills, they can execute random trades with tight stops. This allows them to increase the lot size and eventually they can increase the profit factors without taking too much risk.
Becoming a professional currency trader is not easy. If you think trading is the right profession for you, you must follow the tips of this article. Things might be very complicated for naïve investors but never lose hope. If others can become a successful traders, why not you? Believe in yourself and focus on developing your skills. Last but not the least, trade this market with strict discipline.