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Becoming a forex trader entails living and breathing the thrill, danger, and reward of trading in the world’s largest and most liquid market.
A forex trader takes long or short positions on currency pairs in order to profit. A forex trader is strategic, disciplined, and continually alert to market developments. He or she will be trying to gain a knowledge of currency pair behaviour and put up lucrative trades, whether focusing on a technical or fundamental approach, or both.
Trading never sleeps in the 24-hour currency market, so there will always be movement, albeit forex liquidity levels will peak and dip at various intervals around the clock.
Some traders may desire to work during unsociable hours in order to gain on foreign markets.
So, what does it take to be a successful forex trader? From having a passion for the markets to having unwavering discipline, these are the attributes that will help you as a forex trader straight from the horse’s mouth: our best analysts.
When trading foreign exchange markets, you must have a genuine interest in and understanding of monetary policy, which is one of the primary drivers of price activity. For example, if you trade GBP/USD, you must be completely aware of all Bank of England and US Federal Reserve policy movements and speeches – both of which influence the market. So try to be on the same wavelength as the central bank(s), but don’t gamble against them – they have deep money and almost always win.
Understand the Macro Drivers
The Australian Dollar is a perfect example of a currency that is influenced by a variety of macroeconomic factors. It is frequently seen as a ‘growth’ or ‘risk’ associated unit — one that is likely to benefit when the globe is optimistic about global growth and struggle when the opposite is true. While this is frequently true, there are a plethora of other plausible causes. Major commodity prices, Australian monetary policy forecasts, and regional political risk can all cause it to move against the trend of the market.
It takes two to forex tango
Both sides of the equation influence currency pairings. When trading currencies, a trader must be aware of what is going on in both relevant countries. For example, while trading GBP/USD, it’s a good idea to keep up with the newest Brexit news as well as the latest on the US/China trade war. However, a thorough grasp of market trading is essential in general, from stop losses to chart patterns; from market psychology to the function of central banks.
A proper money management
The major distinction between a hobbyist and a skilled trader is good money management. For example, genuine data from a large FX broker revealed that its clients concluded EUR/USD transactions at a profit 61 percent of the time, but lost money since the average winning trade was 48 pips and the average loss was 83 pips. That’s not a good method to make money, which is why money management is the difference between a hobbyist and a successful professional.
A right mindset
A strong sense of self-discipline is required to stick to a well-defined game plan. A passion for markets and the trading process, rather than just money, is essential – it will carry you through the difficult times. Strong self-discipline is required to stick to a well-defined game plan, but also the flexibility to adapt to changing circumstances, as market conditions are always changing.
Trading may be challenging. From the outside, it may look simple because clicking a few buttons to purchase or sell isn’t tough. But it’s not simple to continually outperform the herd, and practically everyone on this route will confront difficulties at some point. Grit is what allows for success in those obstacles, and a lack of grit makes it simple to give up for whatever reason.
Now that you know what attributes you require, it’s time to learn how to be a forex trader in practise.
The right broker
Choosing the finest forex broker will make all the difference when it comes to enjoying a high level of user experience, dependable customer service, and affordable pricing.
Trading capital and how it works
You must comprehend margin and leverage as a forex trader. Margin enables a trader to open leveraged bets, resulting in more market exposure with a lower capital expenditure. Newer traders frequently regard unused margin as purchasing power and, as a result, tend to be too aggressive in their position sizing. Leverage magnifies both gains and losses, making your account equity extremely volatile. We recommend utilising minimal or no leverage in your trading, regardless of the level of leverage offered by your broker.
A demo account
To become acquainted with the markets, use a demo account. From here, you may develop and perfect a trading strategy, become acquainted with your chosen platform, and gain the confidence required to trade with real money.
Take the plunge
Begin small with your real money account and work your way up. Trade with risk management processes in place, employing stop losses, and only trade after conducting extensive research, whether trading fundamentals, technicals, or both.
Build knowledge and character – always
Winning traders are always learning and expanding their knowledge of major markets. You should be intimately familiar with your chosen currency pairings, including which technical aspects are essential and how market events impact the movements of certain pairs. Recording your transactions in a trading notebook will allow you to evaluate your performance and regularly analyse and reevaluate your strategy.