The foreign exchange trading market is the world’s largest financial market. It is a $2.4 quadrillion market. More than $7.4 trillion worth of foreign exchange trades take place every day. This financial market also has the highest liquidity.
There are many reasons traders get drawn to forex trading. It offers the highest leverage in any investment ecosystem. This is one financial market where action takes place every day.
If you want to become a successful forex trader, it is important to take the right steps. Whether you are an individual or institutional investor, this guide is for you.
Here are the most important things you can do to succeed:
1. Determine Your Trading Style
It is important to set clear goals and determine whether your trading style can help achieve those goals. Most traders use the following trading styles:
- Day trading
- Position trading
- Swing trading
Every trading style comes with its unique risk profile. This means a specific approach is required for each style for successful trading. So, you must select a style that matches your comfort levels and personality.
2. Create Your Trading Plan
Most traders never have any plan. You can excel in this area by creating your custom trading plan. Most traders expect a market movement that they can benefit from. However, most will never think about the price where they will make a purchase, the risk in a trade, or when they will leave if their predictions turn out to be wrong.
Your trading plan should address the following:
- Knowing how and when you will enter the market
- Knowing the amount you are ready to risk
- Knowing how and when you will leave if you find out if you are wrong with your expectations
- Knowing how and when you will leave if you are right with your expectations
- Having a clear idea of how much profit you can generate if your expectations are right
- Protecting your trade with Stop Loss if the market doesn’t move as per your expectations
3. Choosing the Right Forex Broker
Becoming successful at trading requires consistency. Your broker plays a big part in bringing that consistency. It is recommended to do some research to find the differences between different brokers. All brokers have their own trading policies and market approach. This includes:
- Over the counter market
- Exchange market
- Spot market
Select a broker with a trading platform that meets your analysis method and offers a forex solution. Most traders will review forex brokers and provide details not available elsewhere. For example, traders regularly Review Roboforex to be a trusted name in the trading market. These reviews can make it easier for you to compare different brokers, their policies, and markets.
4. Create a Money Management Strategy
No forex broker can think of becoming successful without a sound money management strategy. The following points should help you create the right strategy:
- Make sure there is a target profit
- Consider your chances to be right/wrong
- Use protective Stops to control risk
The objective of money management in forex trading is to balance two key factors. The first is to limit losses and the second is to maximize profits.
Once you have a money management strategy in place, make sure to test it.
Besides the above-mentioned points, it is recommended to learn how to put protective Stop orders. You must also learn how and when to close profit-making trades. Additional tactics include learning to trade with the right amount, maintaining consistency in trading plan, learning to be patient, and becoming a disciplined trader. It is also important to calculate your expectancy. This involves comparing your profits with your losses. This can help determine the success of your trading strategy.
