For many new forex traders, the primary reason for venturing into the forex market is the prospects of making quick or easy money. Many forex brokers have fuelled this with flashy adverts that make success as a forex trader look like a piece of cake.
Unfortunately, this isn’t so. Success as a forex trader is hard. Look closely at some of those colourful adverts, and you can find disclaimers that warn you about a certain percentage of traders losing money with the specific brokers. Some of the brokers have 75% of traders as losers. This piece takes a look at tips that can help you to become a part of the successful 25%.
Avoid the major newbie mistakes
There are two significant mistakes generally made by many newbies to the forex trading world. The first mistake is entering trades without a laid down strategy, while the second is allowing emotions to influence trading strategies.
As soon as a newbie opens an account, he is tempted to go straight into the market. After looking through a few pairs, he pulls the trigger on one, and once he a sees a little drawdown he closes the trade and enters in the other direction only for the market to reverse and head in the opposite direction.
It is due to this type of undisciplined approach to trading that many new traders crash their first trading account. If you want success as a forex trader, you need a trading strategy. Use a demo account to find and modify a good strategy. When you find one, you need to remain rational enough to follow it. Avoid entering trades on a whim.
Understand the movements of the market
To make rational trading decisions, a forex trader must be well grounded in understanding how the market moves at any point in time. Are you looking at an uptrend or a downtrend? Is a move purely technical, or is there a fundamental undertone? These are questions you should be able to answer if you want success as a forex trader. To answer these questions, you need to combine adequate knowledge of fundamental analysis and technical analysis.
When you understand the movements of the market, you will be able to minimise losses and maximise your trading profits.
Copy the big players
Banks, hedge fund houses and the retail traders make up the forex market. Apart from new and struggling retail traders, the others have rules, and guidelines governing them and every trader under the establishment is held accountable for their trading decisions. The newbie retail trader, on the other hand, is only accountable to himself, and this is where the problem lies most of the time.
If you wish to have the same level of success as the big players, you must think and act like them by having strict rules and regulations governing your trading activities. Ensure you always have realistic targets while practising strict money management. Many traders who fail in the markets are those who were not able to reconcile their expectations with the realities of the market.