Many market participants sooner or later have a question: “Is Forex trading profitable at all?” To find out if you will profit from trading, you need to answer a number of other questions.
At what attitude Forex trading becomes profitable?
One of novice traders’ mistakes is to perceive trading as a game of chance. Once a week, you can just enter the terminal, if you are in the right mood, place a bet and hope for luck. With such an attitude, you can hardly expect any stable income.
Try to compare Forex trading with your own small business. For example, imagine that you have opened a bakery. When you are lazy, the bakery is closed, and hungry customers who come for fresh buns go away from you to a nearby establishment. Without any marketing research, you decide to change the product mix. No more éclairs, now you sell lutefisk. You deviate from the recipe, putting 2 times more salt in the cake. You do not look at the calendar, and a visit of tax inspectors comes as a surprise. You do not track prices in the market, you do not pay attention to accounting, and so small losses gradually build up your bankruptcy.
Will such a bakery be profitable?
Nonetheless, some traders treat their trades exactly this way. And then they blame the losses on bad luck, large market players’ manipulations, their broker, or simply difficult market conditions.
If you want to regularly receive income from trading, first of all you’re going to need discipline, well-thought-out decisions, compliance with the plan and strategy.
How to make Forex trading profitable specifically for me?
Trading is fraught with a lot of stress. From the previous question you can also conclude that trading requires regular investments of time and energy. Based on your individuality and resources, you can choose the most optimal Forex strategy specifically for you. Let us consider the main options.
Scalping. This is the most short-term variety of trading, it is about seconds. And in the case of scalper robots, about milliseconds.
The traits mentioned below are necessary for any trader, but for a scalper they are of particular importance.
- Stress resistance and the ability to be resilient to defeats. During one trading session, a scalper risks many times, even if within the scope of several points.
- The speed of reaction. If it is possible, it is better to automate scalping because the reaction rate of a robot is higher than that of the most well-trained humans.
- Having a strategy. If you need to make a decision in one second, you need a clear guideline. Take Profit, Stop Loss, points of entry and exit – all this must be thought out in advance so as not to waste too much time and nerves.
- The ability to optimize costs. During a day, a scalper pays a commission many times and loses points on spread in each trade. For such a trader it is especially important to select a broker with low fees. It is advisable to open an ECN account where spreads will be minimal.
- Endurance. Scalper’s big profit is made up of many small pieces. One needs to work hard to get each of them.
Intraday trading. This type of trading involves opening several transactions within a single day. Here some days are more active, while on other days not a single signal to open a deal may come. In Forex, more active periods occur when important economic indicators come out, and on the stock market more active periods are during the reporting season. Besides, increased volatility may occur suddenly for all market participants, for example, when a cryptocurrency exchange is hacked or when there is a natural disaster.
An intraday trader may need more time to trade than other varieties. A scalper can make a profit in 2-3 most active trading hours; a medium- or long-term trader may remain passive for a long time. An intraday trader may need to remain involved in the market for the whole day, waiting for a signal to enter.
Medium-term or long-term trading, investing. Another side of stress tolerance comes to the fore here. If a scalper needs to survive 50 small stresses a day, a long-term investor will face one big stress. His or her Take Profit is far away, the achievement of the goal will be uneven, with corrections and slumps. The temptation to close a position early or push the Stop Loss farther can come many times during one transaction. Thus, long-term trading is for patient people who can lay an ambush and wait for the right moment. It will be useful to be able to “let go of the situation” and get distracted, knowing that all the necessary actions have already been taken.
Another aspect of investing is analysis. Before making decisions, you may need a much longer deliberation of each individual transaction. You will have to pay more attention to fundamental factors, including economic news and political events for the near future. If, for example, you have chosen the stock market, then you need to analyze the key indicators of the company’s reporting. An Intraday trader can afford to look at a couple of key numbers and make profit from increased volatility in the reporting season. An investor has to dive deeper, analyze a larger number of indicators and take a look at their dynamics, make a forecast based on the company’s recent developments, its plans and the latest deals it has made.
How to make my Forex income more stable?
You can never achieve full predictability of income in trading, the market will never have a fixed salary. However, adherence to risk management and trading strategy will allow you to make financial results more stable.
- When you analyze past deals, you should pay attention to their results “in the long run”. If today you were knocked out of the market on Stop Loss, but in the previous 10 cases setting Stop at this distance turned out to be effective, it means that you’ve made the right decision, even if it caused a loss today.
- If you expect to save your deposit for a long time and increase it, you better be wary of using leverage. Otherwise, one sharp movement in the market can erase all your work.
- Do not lower your guard. A profitable period does not mean that you have found the Grail and can be more careless about trading. Market behavior may change and any strategy may lose its effectiveness.
- Retain motivation no matter what is happening right now.
Good luck to you in your trading!