Trading the forex market can be a lucrative sideline or full-time job. Success rate for this enthralling and relatively nascent career prospect, however, is quite low. If you are looking for a Summer hobby or pastime activity to fill in those boring afternoons and late nights, trading forex should be your last option as this can be a very expensive hobby that could have debilitating financial implications. Read on further if you are looking to succeed as a trader in the vast, volatile, and unforgiving foreign exchange market.
Understand Characteristics of the Market
Establishing a solid foundation of what the forex market is should be your priority. Most novice traders dive straight into more complex learning material like technical strategies and economic reports released by central banks without proper understanding of market characteristics. Although technical mastery will greatly help you succeed in forex, it plays a relatively inferior role to fundamental principles. Get started with trading forex by learning who the key players are, most volatile and liquid periods of the days are, and what currency pairs to best start out with.
Build the Right Mental Framework
The right mental framework shields you from the common emotional pitfalls that traders encounter while trading, primarily greed and fear. Being greedy while holding a winning position and the fear of missing out are two of the hallmark examples of why a career in forex trading becomes difficult if not impossible for most participants. Start building the right mental framework by acknowledging the omnipresence of risk. Any financial market, currency pair, strategy, and time frame you choose will have an attached level of risk to it. Acknowledging this fact frees your mind from the worries of losing money and enables you to follow the predetermined set of rules and trading plan.
Have a Plan
Having a trading plan is the simplest yet most effective way to minimize risk in forex trading. Your trading plan should include the daily hours you will be active in the market, the currency pairs you are to look at, the position sizes and direction bias you are limiting your trades with, and the maximum stop loss and target profits that are congruent with your risk threshold. Of course, having a plan is only half the battle. You’ll have to be firm and disciplined enough to carry out your trading plan day in and day out.
Have a Pre and Post Routine
Getting in that mental zone requires you to have a pre-trading ritual. This prepares your mind to function logically and calmly amidst the chaotic and unpredictable market conditions that change on a daily basis. Pre-trading routines will vary from one person to the next, but common ways that traders get into the zone include exercising during early mornings, eating a good breakfast, or reading the local newspaper. A post-trading routine is equally important as it trains your mind to retain the information and experiences that it has learnt throughout the day.
Get a Broker
All the mental and technical training you undergo will not come to fruition without a brokerage account. For in-depth, unbiased reviews of different brokers as well as valuable information regarding trading, look into AlfaTrade. You’ll find the portal helpful for learning and mastering trading concepts for different audiences, ranging from the complete novice to the institutional trader.
While inherently risky, trading the forex market can provide a good source of income and afford you a more independent lifestyle. Use the guidelines above to get started with your trading career.