Everyone has the potential to become a Forex trader thanks to the availability of trading platforms, advanced computer systems, countless educational resources and ultra-fast streaming technology. Read the article to learn how to develop the best skills.
However, even though Forex trading is available to all at the click of a button, only those with the right skills and knowledge have what it takes to make consistent profits from their trades. Factors such as discipline, control and positive trading habits will all contribute towards your success as a trader. Without them, you risk giving up long before you start making a consistent profit.
7 steps for becoming a successful Forex trader
Step 1 - Find a reputable Forex broker
The first step in becoming a day trader is to find a reputable Forex broker who offers competitive trading conditions, powerful trading platform technology and excellent client support. It’s also important that your selected broker offers reliable account features including low spreads, fast execution and negative balance protection.
Step 2 - Understand trading capital
Forex traders do not require a lot of capital to begin trading as they can trade on margin. This refers to the amount of money required in your trading account in order to open a position. For instance, if you want to open a $300,000 position, $3,000 of funds on deposit is required for a 1% margin. Some Forex brokers may require as low as $50 to open an account and begin trading. Bear in mind, the greater the deposit the lower the impact on your trading account in the event of losses.
Step 3 - Demo trade first
If you wish to become a trader and achieve regular success from your trades, it is always advised to demo trade first. This gives you the opportunity to develop your trading strategy, practice it relentlessly, and increase your trading confidence. This is also the ideal time to familiarise yourself with the trading platform and locate everything with ease.
Demo trading also allows you to experience what it’s like to lose money from trading and gain a better idea of how you might react when it comes to trading live. You will learn how it feels to experience losses and will have the opportunity to put your risk management strategy into action.
The demo trading period should not be rushed. Traders should trade on a demo account for a significant time and make sure they get steady profit. As tempting as it is to begin live trading right away, taking the time to practice on a demo can really pays off.
Step 4 - Educate yourself
In order to effectively trade on the foreign exchange market, it is essential that you have a solid Forex trading education. You need to educate yourself as much as possible about the market and understand that your education never stops beyond the demo trading period.
One highly effective way to reduce the probability of regular losses is to follow a trading mentor or trainer. By gaining the knowledge and guidance of a professional trader you will master how to become an FX trader who adopts the correct trading mindset and skillset.
You should also take advantage of the many tools and resources offered by your forex broker such as articles, video tutorials, online webinars, and more. OctaFX has a comprehensive Forex education centre full of useful articles and guides on how to trade the markets. Make full use of the trading and technical support in place in order to improve your strategy and minimise mistakes.
Step 5 - Start small
If you want to become a day trader you need to start small and work your way up. After practising for several months on a demo trading account, take the strategy you feel most confident with and some money you can afford to lose. Begin with a micro account, know your risk limitations and resist the urge to trade on emotions such as fear, greed, or hope. Apply leverage with caution and be aware of the risks that come with overleveraging. OctaFX have different account types to suit your level and style of trading. You can choose from a Micro account type if you are new to trading up to a Pro account if you are a more experienced trader. For those looking for ECN trading conditions, you can open an ECN account.
Step 6 - Always trade Forex with discipline
Discipline is a crucial part of online Forex trading. To become a day trader who makes consistent profits, you need to implement stop loss and take profit orders to protect against unanticipated market reversals and minimise risk. These should be predefined before any trade is placed and should only be placed once you have carried out in-depth market analysis.
You should also follow your trading plan meticulously and maintain a trading journal to record your trade data. This summarises all of your trades and provides a historical perspective.
A trading journal is an excellent reference as it shows you how well your trading strategy performs in different market conditions. By following a trading journal, you will develop a greater level of confidence and will learn to trade with discipline. Remember, it is very difficult to make profits from every single trade that you execute, so don’t be afraid when losses do occur. Don’t try to control the market; instead, take control by following a plan and a strategy as well as recording your trades in a journal.
Step 7 - Trade currency pairs that suit your trading style
As the biggest and most liquid financial market in the world, the Forex market offers superb opportunities to traders. That being said, it’s vital that you know your selected currency pairs inside-out and feel completely comfortable and confident when trading them. While one individual might find a specific currency pair straightforward to trade, another might find that same pair very stressful, so test out different currency pairs on a demo account first to find what suits your trading style.
Use an economic calendar to stay afloat of the latest economic events and forex news announcements. If you prefer to perform technical analysis, ensure you are comfortable with your selected technical indicators so that you can successfully identify patterns and predict future price movements.
Are you ready to become a trader?
If you feel ready to start Forex trading, implement the above measures for a better chance of making a profit from your trades. You also need to be confident on the trading platform as you navigate your way through each of your trades, coping well under pressure and avoiding trading on emotion. While professional Forex trading requires thorough market knowledge and experience, there's a competent successor that offers an opportunity to automatically copy leading Forex traders. You can choose from the best Masters of Forex, diversify your trading portfolio and learn from the best at the same time.