How to become a successful trader

The standard idea of ​​successful Forex traders is far from reality. The media portrays them in expensive suits, sitting in a penthouse behind several monitors. Faced with such pictures everywhere, it is difficult to believe that a successful Forex trader looks, dresses and behaves like an ordinary person.

Success in Forex trading comes with achieving balance: in emotions, desires, work and rest. As a result, a successful Forex trader becomes pragmatic and realizes that he does not need most of the things in beautiful pictures, although he can afford them.

Individual forex traders are limited to 1-2 monitors and working from home. And hedge fund offices don't have to be in penthouses. To make a profit from online trading, regular buildings are also suitable. 

Who is a Forex trader? 

In a broad sense, a trader is a person who enters into transactions on the stock exchange. The subject of transactions are various assets: currencies, shares, bonds, derivatives and other exchange instruments that are subject to purchase and sale.

Forex traders can be divided into 2 main categories.

1. Salaried or institutional traders 

They build a career as a Forex trader in any organization: a bank, a fund, an investment company. They make deals on her behalf and with her money. At the same time, they can have their own proprietary trading strategy and be successful currency traders. This also includes those traders whose goal is to hedge the company’s risks rather than make a profit. For example, the purchase of wheat futures by employees of a flour manufacturing company.

2. Private or retail traders

They trade on the Forex market on their own behalf or on behalf of their own company using personal funds. A private professional trader makes money by concluding transactions according to the rules of his trading strategy. A successful forex trader can also manage investors' capital. Unlike a broker, a trader cannot enter into transactions on behalf of a third party. 

How Forex Trading Works 

Transactions on the foreign exchange market are conventionally divided into 2 categories: “directed” and “non-directed”.

The purpose of directed transactions is to subsequently profit from changes in the price of an asset. For example, buying a Eurodollar on Forex at a price of 1.08 and selling at a price of 1.09. Such transactions are typical for individual traders or investment companies. Directed trades involve opening and closing. For example, buying EURUSD and then selling this currency pair at a higher price to make speculative profit.

The purpose of non-directed transactions is the direct acquisition or sale of an asset. The initiator of such transactions is not interested in future price behavior. For example, the purchase of a Eurodollar by a US tourist who wants to exchange some of his dollars for euros for a trip to Europe. Or the purchase of USDJPY by a Japanese company purchasing equipment in the USA. This type of transaction is typical for individuals and companies that are not interested in making speculative profits on Forex.

Forex trading is usually done through a regulated broker or through a bank that has a broker's license. A trader can have both trading software and a call to a broker and subsequent placement of an order remotely.

How to become a Forex trader 

To start trading Forex, you just need to choose a broker, open an account and place buy and sell orders through the trading platform. If we are talking about becoming a successful Forex trader for whom trading is a source of income, then it will take hundreds of hours of practice, developing trading skills and analyzing your emotional reactions in the process of actually trading Forex.

To open a trading account, you need to go through a simple registration with a broker. After this, in your personal account you will have access to information about transaction statistics, open accounts and their properties: leverage, deposit size, account type and other parameters.

To become successful in Forex, it is recommended to first open a demo account and practice on it: try trading using indicators and test the trading strategies you have found. Further progress in trading will consist of 2 components:

• analysis of statistics, that is, work to increase the effectiveness of your trading strategy;

• analyzing the reactions of your psyche and reducing the influence of emotions, that is, working on the ability for systematic trading - unquestioning adherence to the rules of your trading strategy.

Criteria for being a successful forex trader 

Success, in my opinion, is measured not in material wealth acquired with income from Forex trading, but in statistical indicators:

• percentage of transactions executed in accordance with the rules of the trading system;

• percentage of profit from the amount of capital for the selected period;

• number of profitable months in a year.

You can make 95% of systematic transactions, but lose all your money in one non-systemic one, which is why the remaining 2 indicators will be bad. You can make huge profits, double or triple your risk capital, and then suffer trading losses over the next few months. And you can trade consistently profitably every month, but if the profit percentage is around 0, such trading cannot be called successful.

To achieve good results, each of these criteria should be gradually improved. They can be compared to three legs of a chair: all are equally important. The higher all 3 criteria are at the same time, the more professional the trader is.

Additional success criteria are:

• amount of capital under management;

• duration of the track record, that is, how long the trader has been actively trading.

The more money a Forex trader manages, the higher the efficiency of trading, since he will be able to earn more from the statistical results of his trading activities. And a long period of profitable transactions on Forex suggests that the trading system and the trader himself are able to adapt to changes in market conditions - volatility and liquidity.

Risk management when trading on Forex 

No matter how much a successful forex trader makes, he can lose his money in one trade. Absolutely all money - both profit and capital itself. If he doesn't set a stop loss.

Risk management is the management of money under conditions of uncertainty, which are typical for all financial markets, including Forex. The price can go up or down, quickly or slowly at any moment. Without realizing that trading involves risk, a trader will not be able to become successful in Forex.

Basic rules of risk management:

• compliance with the rules of the trading strategy. By concluding Forex transactions not according to the trading plan, a trader risks worsening its results, which will lead to a loss of profit;

• limiting the size of future transactions. Even if a successful forex trader uses too much money in a single trade (for example, 5% of the deposit), then a series of 5 losing trades will reduce his capital by approximately 23%;

• Forex trading with liquid instruments. “Major” currency pairs attract Forex traders with a narrow spread, thanks to which the actual entry and exit points usually coincide with the planned ones, with some exceptions. The less liquidity, the worse the entry and exit points will be, which will reduce profits and increase losses.

As a result, the trader should:

• work with stop losses to limit losses in advance;

• risk a small percentage of your capital on each trade, for example, 1%;

• trade liquid instruments. In case of intraday trading, it is advisable to trade also during liquid times for the instrument.

10 Ways to Become a Successful Forex Trader

To achieve success, you need to systematically move towards your goal, devoting a lot of time to the process, adhering to certain trading rules.

1. Learn all the ways to trade Forex: pipsing, scalping, day trading, swing trading, position trading. Choose a trading style that suits your temperament and fits into your schedule.

2. Don't pay attention to the forecasts of other Forex traders, even successful ones. No one knows all the reasons for a particular market movement on the price chart. However, advice from industry professionals can be taken into account.

3. Strive not to earn a certain amount, but to become a good trader.

4. Try using different currency pairs and using different technical analysis tools. Focus on the ones that bring the best results.

5. Study yourself and your reactions to a profitable trade, a losing one, fulfilled and unfulfilled forecasts, missed trading opportunities. Keep a file where you will record your feelings during these events. Over time, this will help the psyche adapt, which will increase the percentage of successful system transactions.

6. Learn and test money management techniques. For example, fixed-fractional and fixed-proportional.

7. Compare your current results only with your past ones.

8. Trade in the terminal or Forex tester for as long as possible to gain trading experience and learn faster.

9. Don't expect quick results. The more realistic the expectations, the better. To get an entry-level position in the profession, specialists study at the university for at least 4 years. Becoming a successful trader from scratch also takes time.

10. Remember the 2 postulates of Forex trading: “I’m not the smartest” and “leave some for the poor guy.” The first means that a person cannot predict the market. The second is that you should not chase buying at the very bottom and selling at the very peak; let the one who entered later than you make money.

    Risks of Forex trading

    The first significant risk is leverage. Forex makes it possible to operate with amounts exceeding the trader’s deposit by 1000 times. Even a successful trader must follow the rules of risk management, otherwise he can lose his entire deposit even on a small price movement.

    Even with competent systematic trading on Forex and compliance with risk management, there is a risk of slippage - the order is executed at a worse price than planned. This is due to a decrease in liquidity; at the specified price there may not be a counterparty for your transaction. Because of this, the trader faces the risk of increasing losses and decreasing profits. Slippage often occurs during the release of important news - the price moves sharply first in one direction, then in the other.

The third risk in Forex trading is related to the trader's psyche after a series of losing trades. This is a condition called “tilt”, in which a trader’s trading decisions are controlled by emotions, which usually leads to unsystematic trading. For prevention, it is recommended to set a goal for the maximum number of transactions per day/week/month, after which you should stop trading.

Associated risks in Forex are related to the integrity of the broker, the stability of the Internet connection, and the performance of the computer or other device used to trade Forex.

Conclusion

The main problem of many traders is that they are in a hurry to become successful, so they start trading hastily, neglecting a planned and methodical approach. Instead of calmly and freely gaining experience in Forex testers, studying technical indicators, selecting entry and exit levels in accordance with the characteristics of the currency pair being traded, the trader succumbs to the blind desire to make money with minimal initial investments.

As a result, capital management and risk analysis associated with mechanical order execution fade into the background. This leads to trading too much volume and ends up losing money and motivation to continue.

Contrary to the popular idea of ​​trading as something special, it is based on a methodical study of the subject, like any other activity. And stable, profitable trading begins from the moment the trader himself becomes a professional in his trading system, which suits his temperament and understanding of the market, his emotions, goals and expectations. And such a transformation takes time.