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Have you ever quit trading after losing some money? Or maybe you thought that trading was not your “thing”? You might also have gotten lost in all the strategies, courses, and tips that those so-called trading gurus have out there. But no worries, overcomplicating things in Forex is usually what makes it seem complicated, thus taking away the opportunity for consistent profits.
The best recipe for becoming a good Forex trader and having consistency in Forex trading requires a bit of discipline, the right mindset, and a pinch of sound knowledge sprinkled in. Below, you’ll find all you need to know on how to get set on the right path in FX trading and become one of the best Forex traders out there.
Most brokers offer some form of education and can lead you with their experience by trading on your behalf, besides this, they generally also provide you with lots of courses and educational material that you can use to expand your knowledge on your own.
If you want to know how to be consistently profitable in your Forex trades, you have to spend a good deal of time learning exactly what to do before starting your trading journey, becoming an independent trader, and ultimately developing your own trading strategy.
Do your homework by reading a lot about the Forex market. Start from scratch, determine what you know and what you do not know, and then get going by learning the terminologies and tools used in the market. Learning terms and ideas such as “margin call”, “price-earnings ratio”, “stop-loss”, “take-profit”, and others, will serve as tools that will help you to be able to control your trades effectively.
After you have learned what Forex is about and how the market operates, it is time to decide what you want to get out of trading. Whether you want to generate a secondary income, replace your main one, or just dabble, it is important to go into this with a clear vision of what you are aiming to accomplish.
Setting realistic goals helps you to understand how to be consistent in Forex trading because when you reach an achievable goal that you have set for yourself, then you will be more willing to continue trading in order to reach the next milestone and move forwards on this road until you have reached the level of success that you desire.
If you are new to Forex trading, it is better to set your expectations low, and by the time you are more confident, you can level up your game and trade with higher expectations.
This might be the most common question asked by all new traders, how much money do they need to start trading Forex with, and how much money do you need to start trading stocks?
Well, you need to start with an amount of capital that allows you to be consistent in Forex trading since your returns depend on how much you invest. Realistically, you can consider 1%-5% per month a fair rate of returns on your Forex trades.
Therefore, if you start out with $100 for example, and you manage to make a 5% return that month, then you would earn $5 in profits, but if you invested $1,000 your return would have been $50 for that same month. You get the idea, right?
But remember, you want to be a consistent Forex trader, so you don’t want to give up all your money at once, this is too risky because if you lose it all, you will be joining the ever-growing number of traders who have already given up on trading altogether.
.Trading in the currency market is an ongoing process. Whatever the outcome, always remember that you trade in order to learn and adjust, thus being able to land a successful trade the next time. Besides that, there are a few other lessons that you learn as you trade.
Despite all the courses you might attend, and everything you end up reading to learn about the Forex market, you need to start actually trading in order to practically learn how it works and get a real feel for it.
Keeping a journal will teach you how to be consistently profitable in Forex trading. At the end of each trading day write down all the decisions that you made, analyze the results of those decisions, note down your gains/losses for that day, and at what price point the market closed.
Many trading platforms and most of the best Forex brokers offer a free demo account to their customers, where any trader can log in, test out strategies and get a feel for how the trading happens in a simulation of the real-world trading environment. All the trades in the demo account are placed using virtual money that does not affect the trader’s real capital, making it a safe and useful way to start out.
Traders who are new to the Forex market can use this opportunity to see how trading happens in real life and get some hands-on experience before entering a trade with their hard-earned cash. That being said, even experienced traders use the demo account to test out new strategies and see if will hold up in the market.
We can probably agree that any trade implies some amount of risk since it all depends on the market price and trend movement. Hence, you need to account for the risks you are taking, after all, it is impossible to avoid them. Luckily you can use some tools to minimize and control your risk as much as possible.
Minimizing the risk helps you to be a consistent Forex trader and achieve long-term gains. There are some tools such as stop-loss and take-profit orders that help you to set a limit on the amount that you can potentially lose or gain, and so avoid the dreaded margin call situation of the trading world.
Also, controlling the amount of capital that you choose to use for the trades you make is a major factor in determining the risk you are going to take. The more capital you use, the higher the risks are. You can learn more about the risk/reward ratio in this article.
One of the most important lessons a trader can learn is that focusing on the short-term goal might bring frustration and quick withdrawal from the market. However, a strategy focused on long-term gains helps the trader become successful over time.
Before you know how to win consistently in Forex trading, you might lose some money due to a lack of experience, which is very natural - even important - because this is exactly how all Forex gurus started building their wealth.
Patience will become your most valuable asset. You might be tempted to close a position when a certain gain is achieved, or you might want to open a new position to compensate for a loss. This is where the patient prospers, before rushing into any decision driven by emotions, sit back and remember to always plan your trades and trade your plans while leaving emotions at the door.
“The goal of a successful trader is to make the best trades. Money is secondary.” - Alexander Elder
Once you have a clear vision of your expectations and know what you need and want, then it is time to pick the right trading strategy for you. This is not random betting, this is a trade based on knowledge and statistics and requires making the right decision at the right time.
There are a few common strategies that most traders use, and this is how traders win consistently in Forex trading. Even experienced traders follow these same strategies, so you can rest assured that you are in good company. You can test and choose which one suits you best, and eventually even come up with your own strategy.
The one-minute scalping strategy is recommended for new traders. It implies opening a position, holding it for a short time, and selling it with just a small pip movement. Then watch, rinse, and repeat it over and over again.
It might be a good strategy to follow for beginners as it helps to accumulate small profits over a few repeated trades. It can be an especially good strategy to use if you are new to the FX market as the risks are small and it gives you the opportunity to observe the trend movements while never incurring any major losses.
For example, if you are trading with $1,000 for the currency pair EUR/USD at a price of $1.1556. In a short time, the market price might rise by 10 pips, and the pair is now worth $1.1557, at this point you decide to sell, giving you a 10 pip gain.
Now, imagine the same kind of trade repeated multiple times a day using a larger amount of capital while applying the same principle as we saw above, that’s how some traders generate a full-time income.
However, it is a short-run focused strategy, and you might not be able to read the market correctly during these short intervals of activity, you might not have the time to sit and watch the market all day long, and scalping is actually illegal in some states in the U.S. So this strategy is definitely not for everyone, but see our “How scalping in Forex works” article to get some more details.
This is a common trading strategy that is followed by most traders around the world, where you open positions at the beginning of your day and close the trades at the end of the day.
Let’s say you start the day off by opening the charts to see how the price is moving for the major currency pairs. You decide to trade the EUR/USD pair, using $1,000. The opening price of the pair is $1.1556, you keep an eye on how the market moves, and decide to close the trade and sell the position when the price reaches $1.1570.
By making this move you just gained $1.4 in profit ((1.1570 - 1.1556)*1000), some traders use much higher capital or something called leverage in order to gain more profits, but more on that later.
By practicing day trading, you also learn how to be consistent in Forex trading, since it incorporates a daily routine of trading every day, and reflecting on your decisions and profits.
Since the Forex market is operating 24 hours, this strategy is suitable for any timezone you live in. Also, this strategy is suitable for day-trading stocks, but be sure that you have enough money to day-trade stocks successfully. However, you should note that day trading is illegal in some locations, for example in some US states, so it is advised that you check with the broker on the legality of day trading beforehand.
This strategy is mostly followed by experienced traders since it requires sufficient reading, analytic skills, and a strong knowledge of how global events and news releases related to economic changes can cause price movements in the market.
The release of important news and reports has scheduled times, these announcements include interest rates, inflation, and economic growth figures all of which impact market sentiment. For example, every time the EU announces that they will be putting more banknotes into circulation, an action that affects their inflation rate, it will usually end up having an effect on the EUR/USD exchange rate.
Traders wait for these reports and news, to prepare for their next move, whether they want to buy/sell their trade position, before the market price changes as a result of these announcements.
From 6 months to 1 year is a good estimate, which is roughly the amount of time needed for most successful Forex traders to start seeing a reliable income flowing from the currencies market to their pocket.
Yes, you definitely can, but it is unlikely that you will realize the gains that you are looking for with such a small amount, given the fact that the average return on Forex trades is somewhere between 1%-5% per month. So if you trade with $100 only, you probably won't gain much more than $5 every month.
It might be good to start with just $100 if you are a beginner and not ready to risk a considerable amount of capital, as it will help give you a sense of the emotions that might come into play when trading with real money.
Definitely. It might take you a considerable amount of time learning about and trading Forex before taking the leap into full-time trading, but it can be done. Experienced traders can generate a consistent income that can be enough to live off easily.