How to Become a Forex Trader? Explained in 7 Simple Steps
Do you feel that forex trading is a bit risky? If yes, then don’t worry. You are not the only one who thinks this way. We get to hear a lot about risk factor associated with forex trading. Also, people incurring financial losses because of forex trading makes it difficult to give it a shot.
It is not risky by default. Those who want to get into this trading should have a calm state of mind. They must know what exactly they are getting into before making any investment decision.
All you need is discipline, expert guidance and the best practice of the trade and you too can make profits by forex trading. You must be thinking how to get the information that can help you to make profits by forex trading. These 7 steps guide will help you make better forex trading decisions.
- Set Achievable Targets
What is the point of setting goals that are not achievable? Setting achievable goals is the key to achieving your financial targets. If your goals are realistic and computable, it helps to analyze your financial decisions. A crystal clear success metric should be predefined that would help you to measure your performance. When you set targets, it determines your plan of action.
Once your targets are set, the next step is to research. It will help you to know the potential trading method which will assist you in order to achieve your goals. One important thing that you should keep in mind is that severity of the risk factor depends on the trading method. Take your time to understand the factors completely and then select the perfect trading method that meets your preferences and requirements.
- Selection of a Broker
When it comes to selecting a broker, never compromise as it is a significant step. It can make or break your deal. Keep in mind that financial decisions are time-consuming. For better results, select a reputed broker who understands your trading style. Keep in mind to select a broker that helps you to measure your performance from time to time.
Carefully go through the terms and conditions specified by the broker, it will help you to in the selection process. The accomplishment of your forex trading goals depends upon the reputation of broker and the excellence of platform offered by him.
- Determine Your Time Period
Forex trading pattern keeps on changing all the time. Changes take place throughout the day that confuses the traders. At times, an intraday chart shows something a buying opportunity and the same thing is shown as a selling opportunity on a weekly basis. To ensure a regular time frame is necessary for your forex trading. For instance, when you consider weekly charts for your trading decisions, cross-check it from the intraday chart as well. It is best when you make trading decisions considering both the charts.
- Ensure the Safety of Your Investment
When you enter the world of trading, you are exposed to certain inevitable risks that reflect downside of the market. There are times where the market is uncertain, unstable; which leads to drawdown. During such times, insurance is your savior. It is recommended to buy an insurance policy in order to ensure the safety of your hard earned money during unstable and uncertain times.
When you invest in forex trading, make sure to invest in a forex deposit insurance plan, non-trading insurance plan or insurance against stop out. Be patient with your choices and don’t go for the first option you come across. Research to compare insurance online; it will help you to know various features that safeguard your hard earned money.
- Always Calculate Expectancy
According to Investopedia, expectancy is a formula that determines the reliability of the system. Expectancy is the formula which is helpful in determining the profitability of your won trades against the trades you have lost.
Here is the formula to calculate expectancy.
E= [1+ (W/L)] x P – 1
E the Expectancy
W is the Average Winning Trade.
L is the Average Losing Trade.
P is the Percentage Win Ratio
A positive expectancy rate indicates that your trading pattern is yielding positive results for you.
- Stay Focused on Your Trade
As you know, forex trading is a risky trade. Keep your personal account and your business accounts separate. Be prepared for small losses. Take lessons from your losses and mistakes. Analyze what went wrong, how can you improve your trading skills. This will help you to make smart trading decisions.
Forex trade experts recommend leveraging maximum 2% of your funds for the trading purposes. If your stops exceed 2%, work on either making trading decisions for short time frames or decreasing the leverage.
- Constantly Evaluate Your Performance
Constant evaluation of your performance is a surefire way to achieve success in the forex trading industry. It helps you to prepare your future plan of action. Learn from your past mistakes and don’t repeat those mistakes, it is the key to success.
Just remember to make right decisions at the right time. If your investment doesn’t make profits, don’t lose hope. There is always another opportunity to avail. Discipline, patience, practice and persistence make a good forex trader.
Wrapping it up
Discipline, patience, practice and persistence are the codes to crack forex trading. There is no short cut to success, you have to work hard and keep these points in mind.