Foreign exchange trading, also called forex or FX, is an exciting and potentially profitable activity that’s becoming increasingly popular. Data from Bank for International Settlements (BIS), an international financial institution serving the needs of member central banks, reveal that trading volume in forex markets reached a whopping $6.6 trillion per day in April 2019, the latest data available.
One reason behind the popularity is the perceived lifestyle associated with successful forex trading, especially images of lavish vacations, stylish cars, and executing trades at a far-off, exotic destination. Although some successful FX traders gladly relate how trading dramatically improved their way of living, they don’t always disclose the amount of effort they make.
Much like other professions or endeavours, becoming a successful forex trader requires more than just sheer luck. You need winning techniques and habits that will propel you to the top.
Fair Forex shares these habits to help you become a successful trader:
Learn the Fundamentals of Trading with a Demo Account
Some people rush into trading currencies right away using real money. This action, however, isn’t advisable if you’re new to foreign exchange. The lack of knowledge and experience in forex markets could cost you to lose hundreds or thousands of pounds.
Instead, start slow and small by opening an FX demo account. It allows you to be more familiar with your chosen trading platform and forex products. It also lets you come up with trading strategies that work for you.
Once you’ve mastered the basics and gained confidence in your trading strategies, go ahead and apply for a live account.
Proactively Sharpen Your Skills
Stephen Covey, the author of the best-selling book ‘7 Habits of Highly Effective People,’ says that being proactive is instrumental to a person’s success. When you’re just beginning, make the conscious effort of growing your skills and knowledge.
Some of the tasks you may undertake are:
- Learning how to read currency pairs
- Establishing a daily routine to improve your trading efficiency
- Tracking global markets by following trustworthy news sources, such as BBC, Bloomberg and the Financial Times
- Developing and refining your trading strategies
- Allotting time for FX education and training, which includes attending forex trading seminars, watching how-to trading videos and learning technical analysis
Follow Effective Financial Management Techniques
If you want to achieve consistent profits from your trades, you’ll need to adopt seemingly basic but effective money management techniques to your overall strategy. A few of these techniques:
- Taking note of interest rate changes
- Identifying the appropriate time for profit-taking
- Determining the amount of money to risk or invest
Know When to Cut Your Losses
Regardless of how solid your FX trading strategy is, you’re going to run into a few losses occasionally. What sets winning traders apart, however, is their ability to cut their losses and call it a day. Not learning how to cover your losses could be financially devastating. If you don’t know when to exit, one bad trade may potentially wipe out a sizeable amount of your capital.
When exactly should you cut your losses? Consider the following exit methods:
- Percentage Retracement Method – If your trade hits a specific loss level, such as three per cent, you pull out your money fast and invest it on other currency pairings.
- Day Trading – Limit your losses by executing FX trades only during the day.
- Limit Orders – Ask the broker to sell or buy a currency when it hits a particular price. This prevents you from incurring high losses.
Fear and greed are two powerful emotions that drive the market. Fear may cause you to trade hastily, which may result in large losses. On the other hand, greed may wipe out your trading capital, especially if you allocate too much of your funds on a single trade.
When you’re aiming to become a successful trader, keep your emotions in check. Before you hit that trade button on your platform, ask yourself:
- Am I looking at this trade with an objective lens?
- Does this trade fit my overall forex trading strategy?
- Are my emotions getting the best of me?
Sign up for a Trading Account
Apart from adopting these effective habits, you need to choose a trustworthy brokerage firm to achieve success in the forex market. Fair Forex is the broker you need.
We offer an easy-to-use platform, low withdrawal fees and a range of currency pairs to help you get started on the right foot. We also contribute to your success by giving you access to free signals and indicators, as well as support from professional traders.