Notorious for its sudden price movements, the forex market is feared by forex traders because of its unpredictability. In search of making profits, traders try every nook and cranny to maximize their profits.
But, no matter how long you’ve been trading, there are days when you sit down and stare at your trading screens, seeing your charts go all frenzy. So, how can a trader ensure they never lose an edge in the market? Is there a successful trading mantra?
No mantra! But there is one solution, and you already know it: consistency. The more you trade, the better you get at it. Here, how you ‘trade’ sets out your part in your trading journey, good or bad.
From trading skills to your forex broker, you are going down the hill if you miss out on anything. In this article, we will try to prevent you from doing that. Thus, we have curated 9 things that every successful forex trader does. Are you ready to find out which one you don’t?
9 Secrets to Successful Forex Trading
1. Preliminary Self Knowledge
While forex trading, only individuals who have a good hold on the market’s fundamentals win. So, clearly, the first step to becoming a successful trader is to understand everything you can about it. Be familiar with all the key concepts — forex jargon, analysis, risk management, trading systems, trading psychology, etc.
And most importantly, align your goals with your preparation. If you rush through this stage, you will have a hard time sustaining in the market. There are abundant resources online. Be an active member of the forex trading community. Engage with fellow traders with whom you share the same goals. If you keep learning in continuity, you will be far ahead in the market, increasing your potential to become a successful trader.
2. Compatible Forex Broker
A reliable forex broker is the backbone of your forex trading journey, as they provide a direct entry into the market. Hence, you need to keep your eyes and ears open when selecting them. Here are a few important criteria you can’t ignore when choosing a broker.
- Regulatory Compliance
The first thing to check is regulatory compliance. Because the market is flooded with them, fake brokers are great at pretending to be “the leading broker in the market.” Although it can be hard to spot them because all brokers look pretty much the same, you can avoid getting scammed by checking their regulatory compliance in your country or region.
Regulatory bodies protect and promote the integrity of brokerage operations. Different countries have different regulatory bodies. So, it is important to research and look for these credentials.
- Account Features
A Forex broker will offer you different account options. Fulfilling the different needs of traders, these trading accounts come with different trading conditions. Though the major trading conditions remain the same: spreads, minimum deposit requirement, lots, spread, margin, leverage, etc. Check for additional features as well, such as trading calculators, which will come in handy throughout your trading career. A trader should carefully take note of these requirements and register with an account they find worthwhile.
- Currency Pairs Offered
“Which forex trading pair should you trade?” This is one of those questions that all beginner forex traders get asked. Although the market gives you the full liberty to trade whatever pair you like, every pair comes with risk. Some lower, some higher. New traders are advised to go with major pairs since they have more volatility. And most brokers offer these pairs.
- Customer Service
A good forex broker should offer responsive and efficient customer service to address any technical issues, deposit or withdrawal concerns, or other questions you may have.
- Trading Platform
The trading platform is the software that you will use to execute trades, so it is important to choose a broker with a user-friendly and reliable platform. Look for a platform that offers advanced charting tools, real-time data, and other features that may be important to your trading strategy.
Is your money safe with your broker? This is a question that concerns every broker. Security features vary from broker to broker; therefore, it is important to choose a broker that offers robust security measures to protect your account from hackers and other security threats.
3. Methodology Selection and Application
A powerful trading system is one of the top prerequisites for successful trading. So, how efficient is your trading system? How many times has it helped you win or lose?
Developing and sticking to a trading methodology are keys to successful forex trading. Using a good mix of fundamental and technical analysis is key to building your trading system.
4. Chart Synchronisation
Constantly moving up and down, the forex market never sits still. The price movements can take a big leap or take a relaxed pace. Anyhow, a trader should have both a broader and a narrow view. Thus, synchronising multiple timeframes and charts is essential. Different timeframes will help traders comprehensively view the market and make more accurate predictions. However, make sure you don’t ignore your trading style.
5. Expectancy Calculation
Calculating the expectancy of your trading strategy is crucial for long-term success. After all, we all want to know how our trade will pan out. This statistical measure helps you assess the profitability of your trades. For example, calculating the average profit and loss per trade can determine whether your strategy has a positive or negative expectancy.
Using a Forex profit calculator can be beneficial in helping traders calculate their trading expectancy and make informed decisions in the market. You can input a few important values in the calculator and get the expected profits in your base currency. This will help you plan your trades much better.
6. Money Management
Do you know the secret truth about trading? Trading involves more risk and money management than trading itself. You won’t have a problem making profitable trades if you can manage your money well.
Always use stop-loss and take-profit levels to manage your risk. Determining position sizes based on risk tolerance will help you avoid excessive risk.
7. Confidence Build Up
Confidence plays a significant role in forex trading success. Building confidence in your trading abilities requires many things, including practice, discipline, and a positive mindset. Keep a trading journal to track your progress. Analyze your trades. And learn from your mistakes. As you gain experience and see positive results, your confidence will grow.
8. Weekend Homework
The market stops you from trading on weekends. But you shouldn’t stop yourself from studying it. Utilise the weekends to conduct thorough market analysis and research economic news, geopolitical events, and market trends that can impact the currency. This will help you make informed trading decisions when the market opens on Monday.
You should also perform regular backtesting, a process of analyzing historical data to determine the effectiveness of a trading strategy. This will help you identify flaws in your trading strategy and re-file as per the required market.
9. Record Everything
How do you know if you are trading better than a week ago, a month ago, or a year ago? Making more money than before can give you a positive, but not clear, feeling. Yes, your profits could lie! You have to trace your overall trading journey to see your growth. And there is no better way to do this than by recording your trade.
Use a trading journal to enter all the information about your trades. Not only will you be able to know whether you are growing or not, but you will also know what is heading or stopping you from your success. Regularly reviewing your trading journal to identify your trading strategy’s patterns, strengths, and weaknesses. And work on them to improve your growth.
What are Your Chances of Forex Success?
Every trader wants to know: what are my chances of becoming a successful forex trader? Let’s seek data here, as words will give you a deceptive picture.
Some sources suggest that 8-10% of traders succeed in the market. Others say that up to 90% of retail traders fail in the market. One thing is clear: Not everyone can become a successful trader. But those who do have a few things in common. They define their risk in terms of a percentage, have a well-defined trading strategy, and use risk management tools to lower their risk.
Additionally, successful traders tend to have a realistic mindset. They understand that there are no guarantees in the forex market. All in all, they have all the things that we have discussed in this article.
The path to becoming a successful trader requires endless iterations of learning. And most importantly, they should make the right choices. From an excellent grasp of the market and the support of the right broker on their side to control emotions, a forex broker should be all-around. However, it is not easy to ace all these aspects, but you can focus on them with the right management.
We conclude the discussion of the top nine things that every successful trader needs. If you analyze and see what you are missing and work on it, you can surely take off to becoming a better trader soon.