How To Become A Professional Forex Trader In 5 Steps
In this digital age, there are numerous ways to generate wealth, and many of them allow you to make money without leaving your home. Those who are ready to invest some time and money can consider forex trading as a career option. Professional traders are able to make consistent profits in the dynamic forex market as they get a lot of trading opportunities, and they are skilled enough to use them well. Before becoming a trader, the first thing to do is choose a broker and trading platform. Most beginners start off their trading journey on MT4 due to its user-friendliness and powerful features specially designed to meet the requirements of currency traders.
The majority of forex brokers offer MT4 as the default trading platform, as it is suitable for novices and professionals alike. Once you pick the trading platform, you can start trading immediately by opening a trading account with the broker. But you need to follow some key steps to ensure success in your trading venture. Keep reading to learn about these steps and their relevance in trading.
1. Learn the basics of Trading
This is one step that no one should skip before getting into forex trading, as you won’t be able to earn any profit unless you take some time to learn. Thankfully, this is the best era to learn about anything and everything without much hassle, as all the information you need is freely available on the Internet. Those who are not fond of online learning can depend on books that professional traders write. You can find many good books about the forex market, its unique characteristics, and trading concepts and strategies.
You should also study technical and fundamental analysis for making sound trading decisions during the process. I suggest combining both types of analysis as that can give optimum results in the fast-moving market. Technical analysis is entirely focused on price movements and the patterns they form when the market data is displayed in a chart format. Candlestick charts are the primary tool for technical analysis in forex.
You can also add some technical indicators to confirm the analysis, and most traders decide their entry and exit prices based on the key support and resistance levels. Fundamental analysis is deeper as it looks at economic indicators and news events that impact the value of currencies. Besides these, you should also learn the meaning and usage of various forex terms like pips, lot size, position sizing, going long, shorting and more, which are relevant in the trading process.
But just reading about these concepts and terms won’t be enough to master the art of trading in a live market. You will also need some practice to develop your trading skills and a well-defined strategy. Hence, all beginners are advised to start with demo trading as you get to practise trading for free and work on your strategy in real-time market conditions without the risk of losing in the process of learning.
2. Work on your Timing
The forex market operates differently from other financial markets as the market hours are very flexible, with 4 major trading sessions. You can trade from anywhere at any time except on the weekend. However, the liquidity and volatility keep changing throughout the day, and certain currency pairs are more tradable during specific trading sessions and session overlaps. Hence, you need to pick the trading session with a lot of consideration. The duration of your trades is also relevant in the forex market, as your profit potential and risk will be decided by the timeframe you choose for analysis.
Shorter timeframes offer more trading opportunities for quick profits and no overnight risk. However, short-term strategies like scalping and day trading can be complex and stressful for an average beginner. Swing and position trading focus on longer timeframes and the interest rate differential (swap) will have to be considered when you keep the positions open for an extended period. However, these trading styles are less intense, and you won’t have to watch charts all day.
The profit potential is also higher, and the overall experience is less stressful, making it suitable for beginners. But still, entering the trades at the right price and at the right time is crucial for getting the desired results with any trading style or strategy. One of the key traits of a profitable forex trader is having good timing with the trades. Some traders spend all of their time in front of a screen, but they cannot make consistent profits due to a lack of timing and precision.
You don’t have to enter trades throughout the day, but being able to execute trades at the perfect time makes you a successful trader in the long run. You may not be able to figure this out in a day or two as it takes time to develop these skills. I will encourage you to keep learning more and not make impulsive decisions which can put you in a risky position in the volatile market.
3. Devising a Strategy and Detailed Analysis
The 3rd step for becoming a professional forex trader is devising a solid strategy and getting into detailed analysis to find ideal trade setups for yourself. Your strategy should state the method you will use for analysis and which patterns or trends will be taken as your trade trigger. This will differ for each trader based on their trading style, skill level, and risk tolerance. No strategy can fully eliminate the risk, but a simple and clearly defined strategy makes it easier to manage the risk.
I already talked about combining technical and fundamental analysis to get optimum trading results, but some of you might get confused if there is contradictory information. In that case, you can just stick to technical analysis while keeping an eye on the news to avoid being caught up in sudden volatility caused by economic data releases or news events. Technical analysis is sufficient to find trade setups and manage your positions based on the price action.
But make sure that you don’t compromise with risk management, as the success or failure of any strategy or trading approach depends on how well you can minimise the potential losses while optimising the potential gains, Analytical skills and risk management skills are vital for building a trading career in the dynamic forex market which can move in any direction when there is fundamental factors impacting the prices.
It does take some time to master technical analysis, and you will have to gather more experience to be able to perform fundamental analysis with precision. It can be hard to predict the market situation in certain situations where the market sentiments are unclear, and different traders have different viewpoints. So, you need to learn about discretionary trading instead of relying on a single indicator for analysis.
4. Be Free From Misconceptions
When you are preparing to kickstart your trading journey with continuous practice and working on your strategy, you should only believe in facts, as there are many myths and misconceptions about the forex market. Those who get into trading with these false beliefs will often set unrealistic goals, leading to disappointment later on. If anyone tells you about secret formulas for success or shortcuts to making huge profits in a short span of time, you should not fall into these traps, as there are a lot of scams in the forex market.
Trading with any such misconception will limit you from reaching your true potential as a trader. Many traders who fail to become successful are misinformed about the currency market and don’t research enough to learn the truth. Many think that forex trading can make them rich without any effort, and those who enter the market with such a mindset will only lose money as they underestimate the risk.
5. Correct your Mistakes in Time
Once you start trading on a live account, you need to be extremely careful not to make any trading mistakes that can affect your performance. In order to avoid making costly mistakes, you should continue to educate yourself about trading techniques and look for ways to improve your skills. However, each beginner will have their fair share of mistakes and failures in the initial phase. You just need to detect and correct these mistakes in time by keeping track of your trading performance with a trading journal.
The 5 steps that are stated above are sufficient to ensure that you can mark a successful beginning to your trading journey in the forex market. But being disciplined and not breaking the rules that you have set for yourself is the key to remaining successful in the long run. You should never rush the learning process, and following a professional approach is important to deal with the challenges that are part and parcel of the trading process.