How to Become a Successful Forex Trader
In forex, there’s no single path to success. After all, the forex market is the largest and most liquid in the world, turning over trillions of U.S. dollars each day. It’s also one of the most dynamic; the value of a currency is dependent on factors ranging from interest rates to geopolitical news. For example, when Indonesian forex reserves hit a record high of USD 146.9 billion just last month, the government credited it to a recent global bond sale –– not exactly the sort of thing your average investor necessarily plans on looking out for.
With all the possibilities the market poses, there are definitely many ways to go about forming a trading strategy. However, there are definitely a few rules of thumb you can follow to hone your instincts and work your way to success.
Set your goal
A definite end goal gives you a direction to follow when making trades. However, try not to aim for a specific yield, like hitting Rp 10 million in your first year. This will force you to look for market opportunities even when there aren’t any, and may only frustrate you over time. Instead, set an overarching yet realistic goal, like funding your retirement plan. This allows for more flexibility and makes it easier to adjust a trading strategy as you go.
Do your research
Understanding the market is crucial, so it is important to observe the price movements of currency pairs and learn what impacts those movements. There are different approaches you can take here. You can be a fundamental trader who stays on top of current events, or you can be a technical trader who uses digital tools to forecast future market conditions. Or you can do a bit of both! Whatever approach you choose, countless online resources such as our Invest Success articles, are available to help assist your educational process and boost your understanding of the market. In time you’ll come to understand how to navigate forex.
Next, put your newfound knowledge to the test and practice trading on your own. Fortunately, there are actually ways you can do this for free. Aside from helping you learn the ropes without actually putting up any capital, a demo forex trading platform on FXCM allows you to try out different trading strategies and familiarize yourself with analytical tools, all without actually making trades. By simulating live market conditions, a demo account of this nature can help you practice assessing charts, applying technical indicators, and ultimately placing orders when you feel the time is right.
Stick to your strategy
With sufficient research and practice under your belt, you can formulate a trading strategy to work toward your goals. First, determine your risk tolerance and the tools you’ll use to trade. For example, are you willing to trade overnight, or are you more comfortable opening and closing within the same day? Will you use moving averages, the relative strength index, or other indicators to inform your trades? Once you figure these things out, your task is to stick to your strategy and keep emotions out of your decisions. That means ridding yourself of needless fear or boundless ambition as well. According to a Public Finance Institute trading psychology guide, overcoming fear and greed makes for more consistent, data-driven decision-making that can lower the risk of your trading activity and keep you focused on your goals.
Patience is especially valuable in trading, as it will help you keep a steady head in an ever-changing market. Losses are inevitable, but you can mitigate them by sticking to your strategy. And as your experience grows, you’ll gain the know-how needed to make bigger and more consequential trades. The key is not to rush, and to take on only as much as you can handle. After all, there will always be the next trade, so there’s no pressure for you to be successful right away.
Keep these tips and strategies in mind, and you’ll be on your way to success in forex.