Success. Everyone strives for it; few achieve it. That’s true specifically in Forex trading. What does it take to be successful in currency trading?
An FX trader has odds against it from the start. Everyone wants a “bit” of his/her trading account.
From brokers to other market players, they all influence prices. Except for the retail trader.
Over five and a half trillion (with a T) dollars change hands on the FX market. Daily.
However, the retail size of this market is insignificant. In fact, it is so small you can ignore it.
About 6% of this substantial daily volume belongs to retail traders. Or, to regular Joe’s.
Let’s define the regular Joe in currency trading:
- Typically has a job but wants to make more money.
- Thinks he/she is smarter than the average and understands financial markets.
- Wants to make a million in a week or so.
- Instead, losses the first deposit almost certainly.
What does it take to be successful then? In this article we will cover:
- How to make money with Forex
- The traits of a successful trader
- How to align your interests with the big guys
- How to become a Forex trader
But above all, this article is about knowing yourself as a person. Or, as a person that wants to make it in currency trading.
You probably read many Forex success stories so far. But are they for real?
Is it really possible to reach profit trading consistently? To trade for a living?
The journey of a thousand steps starts with the first one. In this case, it begins with learning.
Knowledge is of More Value than Gold – the Moto of Currency Trading
King Solomon’s words apply perfectly here. When starting to learn how to trade Forex successfully, understanding the market comes first.
Namely, the forces surrounding the FX phenomena. As mentioned earlier, retail traders make a small part of the daily turnaround.
Who moves the market then? Here’s a list:
- Forex brokers
- Central banks
- Treasury departments
- Commercial banks
- Liquidity providers
- High-frequency trading industry
That is, to name only a few. Understanding what these entities do represents the first step in the journey to find out what does it take to be successful.
Because these forces move the market, a trader’s interest must align with them. Therefore, find out what their role in the market is.
Like to follow changes in monetary policy? When they come, someone needs actually to implement them.
For example, if the Fed (Federal Reserve of the United States) announces a bond-buying program, the market reacts in an instant. However, the actual buying starts later, and THAT will move the market too.
That’s just a short example of how forces in the market make prices move. As currency traders, we must align or face them.
How to Make Money Trading – Understanding Forex Brokers
Forex brokers fight like crazy for clients. For this reason, they advertise currency trading as a piece of cake.
Commercials like “currency trader for dummies” or stories about Maria, the sales lady making a profit, are everywhere.
Like football? Chances are your favorite team has a sponsor from the branch.
Brokers should have their interests aligned with their customer’s interests. But they don’t.
At least, not always.
Because trading implies buying and selling a currency against another one, tapping the interbank market is critical. But, also expensive.
Introducing brokers. Or, entities that, against a fee, allow retail traders to tap the interbank liquidity.
The problem comes from the competition. They all fight for a relatively limited client pool.
Moreover, only active traders count. After all, their activity brings commissions.
To profit the most, some brokers trade against the client’s position. While this isn’t illegal, it raises an ethical question. The brokerage house principle gets lost.
What does it take to be successful in currency trading? Step number one: choose the right broker.
Or, a broker that:
- Offers low and fix spreads
- Grants the best possible technology and keeps updating it
- Doesn’t allow huge leveraging
- Taps more than one liquidity provider to get the best rates
- Has a diversified offering (currency pairs, commodities, CFD’s, indices, etc.)
- A financial authority regulates it
- Offers segregated accounts
- Doesn’t trade against its clients
A broker should be a trader’s partner. Should encourage traders to take part in the trading game. But, presenting the market in a fair way.
How to Become a Trader
The right answer here is what do you want to be. Or, more precisely, what your expectations are.
If you treat the market as a hobby, that’s ok. But don’t expect much.
This is one of the most challenging jobs in the world. The art of speculation is not for everyone.
Of course, it sounds exotic to answer your friends you’re involved in currency trading. Sounds fancy, right?
But fortunes are lost in a blink of an eye. And made.
Chances are, though, that first, traders lose money. Learn to lose, before learning to win.
What does it take to be successful in currency trading? Step number two: learn to lose.
It may sound crazy, but people do stupid things when losing. They tend to lose it all.
The recent crypto-market correction shows the perfect example. A pol revealed people were willing to lose all their deposit, before getting out of a trade.
That’s insane, to say the lease. As a trader, you must embrace loses.
Losing is part of the game. Winning is part of the same game, too. Only that this is not a game.
The market is made of real people, with real money. When the stop loss gets hit, you realize things just got real.
To embrace loses means to expect them. You can’t be right one hundred percent of the times.
After all, in life, in general people make mistakes. Have you ever feel sorry for something you’ve done?
The same in currency trading. Expect mistakes and learn how to handle them.
Psychology in trading plays a vital role. Calculate your steps, the risk, and the reward. This way, you’re a step closer to learning how to become a day trader.
How Long Does It Take to Become a Millionaire?
There’s a saying that the market is like a beautiful woman. Ever changing, has an aura of mystery, and everyone’s fascinated.
Yet, no one truly understands it. Some people expect to become a millionaire overnight.
That’s not possible. If you treat the market with respect, you’ll get respect back.
To treat it with respect, you must learn how to make profit. Technical and fundamental analysis of the market helps.
A plethora of trading theories exist. Even more technical indicators and fundamental aspects.
And they all aim to decipher the financial markets secret. For this reason, learn what currency trading is before taking the plunge.
What does it take to be successful in currency trading? Step number three: learn to trade.
Here’s a list of things to check:
- Elliott Waves Theory
- Drummond Geometry
- Japanese candlesticks techniques
- Point and figure charts
- Gartley’s harmonics
- Gann theory, etc.
But also concepts like:
- Market geometry
- Trend lines
- Pattern recognition strategies
- Forex correlations
- Market psychology
- Macroeconomics, etc.
Things exist. And they exist for a reason.
If there’s already info about currency trading, why not learning? In the Forex market, pride comes with a price tag. An expensive one.
I’m not saying you shouldn’t create something new. But at least have a look at another people’s work and legacy and put everything together.
You’ll be surprised how much you’ll learn about currency trading. Moreover, you’ll learn what makes people succeed.
So, the right question should be: how to make profit when trading? If you’ll learn to do that, any material target becomes possible.
Because there’s no straight line to success in currency trading, it all depends on you. After all, that’s a rule in any area, not only in trading.
What Does It Take to Be Successful?
The following should be a guide for how to make it in currency trading. But the principles apply to all areas of life, not only to how we approach the market.
Expectations should be real. Or, calibrated.
It is entirely fine to want a million dollars fast. But is it real? Is it within your grasp?
So, keep it real, and you’re off to a good start. Have realistic expectations about what the market can offer. And, what you bring to the trading table.
You must bring time. And dedication.
If you think you’ll make it by trading two hours in the evening, think twice. You won’t.
To speculate, you need to be a shark. And at the same time, incredibly humble.
Take what the market gives. And respect the market.
How to Make Money on Forex – A Quick Guide
The beauty of currency trading is that the market is always open. Even when it isn’t (e.g., over the weekend), in fact, it is.
Events over the weekend influence prices. Sometimes what happens Saturdays and Sundays is more important than the economic news during the trading week.
Think of elections for a change. Recall the 2017 French elections result? They created a gap on all Euro pairs. Moreover, that gap started one of the most reliable trends in recent market price action.
Finance is a simple industry made complicated by people. It’s all about psychology and understanding the way to deal with human nature.
Having NO Position IS a Position
Overtrading is a nasty habit. So wrong, that it is the number one cause of losing when trading.
People feel the need to do something only because the market is open. However, that’s ridiculous if you think of it.
It’s only in your head. The market doesn’t move all the time.
In fact, statistics show it mostly consolidates. It needs a reason to move.
And, most of the times, that reason comes with news. Inflation, economic growths, politics, macroeconomics, etc., move markets.
When this happens, and traders have a portfolio full of positions, a small swing against you and you’re out. The sound of a margin call is not funny though.
Professional investors always have a cash position in their portfolio. After all, cash is king, goes the saying.
It allows them to react to market swings. Do the same, and you’ll have a competitive advantage in currency trading. A big one.
Use a Money Management System in Currency Trading
Perhaps the essential part of what does it take to be successful comes from money management. Here’s why.
People have jobs. Besides the fun of it (if any), they have jobs for a reason: to make money.
Their focus is to have a paycheck at the end of the month. And, to pay the bills, travel, eat, and so on.
That’s 99.9999% of the cases. However, all those people do not manage the money.
Or, if they do, they do it in the family. NOT as a profession. And, not in a professional way.
Managing money means managing risk. How much are you willing to lose, for reaching the profit?
Defining the risk comes first. Next, identify the take profit. Finally, execute the trade.
Then, rinse and repeat. On and on, the same thing. That’s how you create a system.
However, the variables of a money management system must stay the same. Or, the input.
- Cut out losses
- Exploit an uptrend and a downtrend the same way
- Change the volume in proportion to the capital available
Those are only some things to consider. Because money management is an art, few have it.
It does hold the key to what it takes to be successful in currency trading!
Avoid Excessive Diversification
Is day trading profitable? The answer is yes. All trading, not only day trading.
Traders associate scalping to day trading. And, they’re right.
In currency trading, they open and close multiple trades every day. However, they close all positions before rolling over. That’s day trading.
But currency trading isn’t only day trading. It is swing trading and investing too.
And all three (day trading, swing and investing) must use diversification. To diversify a trading account requires skills.
- Correlations in the Forex market
- Relationships WITH the other markets (e.g., oil and gold, equities, etc.)
But excessive diversification hurts. It results in hedging the account.
Hence, even when the market moves, the trading account moves only for a fraction. It is like riding a horse that never runs.
Try Always to Reduce Costs in Currency Trading
Like it or not, trading comes with costs. Here are some of them:
The moment you open a trade, the broker deducts a commission. It doesn’t matter if the trade makes a profit or not.
Look for hidden fees. Sometimes they’re not visible. Hence, the word hidden.
Charges for handling funds. Some brokers charge ridiculous amounts for depositing/withdrawing capital.
Of course, these fees aren’t visible. Typically, when traders find out it is too late to stop the process of opening a trading account.
Negative swaps affect balances too. Due to negative interest rates, holding positions overnight is costly. Trading futures might save you some money.
Fixed and small spreads help too. While most traders ignore these costs, they represent an essential chunk of a trader’s profitability.
Plan a Trade. Trade Your Plan
Having a strategy is nothing if you can’t execute it. This represents one of the most relevant problems of today’s retail traders.
Currency trading comes with a psychological aspect. While winning is everyone’s intention, dealing with a winning streak comes with challenges.
How come? Because winning makes traders complacent, the risk of giving it back to the market rises with every winning trade.
There’s a saying that success is the sum of a trader’s failures. Oh, that’s so true.
Only when failing traders pay attention to details. And that’s when great trading plans appear.
But, if you bothered to plan, make sure you stick to it. Religiously!
Planning is one thing, though. Executing is another.
Some traders have a great time planning their strategy over the weekend. But a hard time applying it when the markets open on Monday.
Psychology plays a trick on us all. What do you do when you ACTUALLY sit on profitable trades? Temptation tells you to close them and book the profits.
What can go wrong? Well, if it wasn’t part of your plan to book the profits, everything’s wrong.
To sum up, there’s not a straightforward way on how to become successful. After all, this is a question for all aspects of life. Not only currency trading.
What does it take to be successful in general? First, it takes a lot of work and effort.
Nothing comes for free. If it does, it isn’t real.
Second, dedication and passion help. Believe in you and in your capabilities. This opens many doors and the gates to success too.
Finally, a bit of luck never hurts. The three combined will make any person successful in his/her field. Currency trading included.
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