The daily volume of the Forex market is $6.6 trillion, making it the biggest marketplace in the world. No surprise more and more people are getting interested in making currency trading their source of income. You can trade currencies 24 hours a day Monday through Friday regardless of your geographical location and time zone. Unlike other financial instruments, it allows you to start with minimum investment – your initial deposit can be as small as $1. These are only a couple of reasons that make forex trading from home sound attractive. You can find 7 valuable recommendations on how to become a currency trader in this article.
What Is a Trader?
Briefly, a forex trader is a person or institution that sells or buys currencies on the foreign exchange based on predictions about their future price. Individual traders in their turn vary from professionals who often trade for financial firms or multiple clients to amateur traders who trade either as a hobby or to diversify their sources of income.
Same as any kind of investment, currency trading deals with the risk of money loss. This is why it is crucial to understand how this market works in order to become a successful forex trader. Read our 7 thoughts on what it takes to be a thriving currency trader below.
1. Find a Reputable Forex Broker
Finding a broker that protects your interests as a trader might be difficult but it is worth the effort. There are many options online offering bells and whistles as well as tempting trading conditions. But the first thing you should look at when choosing a broker is the security of your funds. So make sure a broker is trustworthy before depositing live money. Read reviews and check licenses to make sure your funds are safe. Another important thing to consider is transaction costs. You don’t want to pay huge commissions and fees to withdraw your money or lose cash because of wide spreads. Check what’s there on the market and pick the best one.
With Justforex you get the best spreads and 0% withdrawal commissions that guarantee your profit won’t be eaten away by high fees. And if you have any questions, contact our round-the-clock customer support. Offering a wide range of trading instruments and reliable service, Justforex has earned high regard among traders all over the world.
2. Educate Yourself
For choosing the best way to trade currency (what pair to trade or in what direction to trade), forex traders refer to specific data. There are two forms of analytical models widely used by professional investors – fundamental and technical analysis. The evidence of analysis helps traders make decisions about potential trading opportunities and whether or not to buy or sell a particular instrument.
Fundamental analysis deals with factors that contribute to a future supply-demand ratio. In terms of the currency market, it can include monetary policy expectations, GDP data, and unemployment statistics of a particular country which can impact the currency rates.
As for technical analysis, it uses patterns of price directions and technical indicators from the past in order to predict the prices in the future. These patterns can help indicate potential price movements. Technical and fundamental analysis may show information in different ways but both methods can lead to the same conclusion or even urge the same trade being placed. Ideally, a trader refers to both technical and fundamental sources in order to make the most sound trading decisions.
If you want to be a trader, reading currency market analytics should become part of your daily routine. Following up on financial and political news and understanding its impact on currencies is equally important. To learn more about current market trends, follow up our newest market reports and daily forecasts.
3. Choose a Trading Strategy
One of the essential steps in your research should be finding a viable strategy designed to help you reach your goals. A great trading strategy must assist you in analyzing the market and executing successful trades. Strategy choice often depends on fundamental and technical data. Multiple trading signals that urge a trader to buy or sell a currency are taken into consideration in each trade. Experienced traders choose a strategy based on the risk-reward ratio as well as the amount of time they are ready to spend on its implementation.
Remember, there is no need to reinvent the wheel – choose an existing strategy that has already worked for other traders. From price action trading to scalping and swing trading – there is at least one that will bear fruit. Try implementing it several times. If it brings you profit, use it for bigger trades. If the chosen strategy proves to be inefficient, try another one before you have one that works for you. Though keep in mind that none of the strategies should be seen as a one-size-fits-all approach.
4. Demo Trade First
Practice is the best way to learn forex. But before you actually start investing real money, it makes sense to learn how a trading platform works and what is the most efficient way to use tools designed to boost your trading results. A demo account allows beginners to get in terms with the fx trading platform interface and place their first orders. This kind of teaching account uses the same terminal, shows the actual situation on the market, and gets the real quotes. It has the same functionality. The only difference is that no deposit is required from your side. People trade with fake money which makes it impossible to withdraw any profit.
Using a demo account allows you to do all the same things as the real account. You can learn how to place an order, change leverage, set stop-loss and take-profit limits, etc. Though it is often said that the emotional involvement of a trader as well as execution of orders is different when trading live money. So after you get comfortable with a demo account, try your hand at a real one.
5. Master Risk Management
Higher risk often brings better returns. Although, sometimes it leads to huger losses. Risk management in forex is aimed at minimizing losses and maximizing returns. Amateur traders often fall into the trap of risk mismanagement. This is why before placing an order ask yourself “How much am I ready to lose in this transaction?” and “How much can I make on this transaction?”. You don’t want to risk more money than you can potentially win. And definitely, the last thing you want to do is to blow your trading account in pursuit of unrealistic goals. So don’t forget to place stop-loss orders, think over a viable risk-reward ratio, and choose leverage level carefully. The success of your trading strategy depends on whether you’ve done your risk-reward calculations properly.
6. Control Your Emotions
In order to succeed in anything, you have to be consistent. This is especially true for any kind of investment. Beginner traders often face greed and fear of money loss. These are two things that might make you act in the most irrational way. And they are the ones that you absolutely have to learn to cope with if you want to thrive. To do so, focus on the data you have as well as your strategy. The most common mistakes beginner traders make are panicking and taking hasty decisions if everything doesn’t go as planned. Don't fall into this trap! Remember that practically every strategy is accompanied by losing periods. So don’t let subtle movements on the chart lead you down the wrong path. Stick to your strategy! Impulsive decisions will get you nowhere.
7. Start Small
Set realistic goals and don’t try to become a millionaire overnight. It takes time to learn to trade and a few losses are possible on the way. If you keep that in mind, shortly you will yield profit. Beginner traders who take one step at a time and don't let the greed mentality take control of their actions are more likely to succeed in the long run. Test your strategy before risking a huge amount of cash, spending some time on finding the best way to trade. Do it with the sum of money you are not scared to lose. Once you feel more confident in what you’re doing, make a bigger investment.
Any person who wants to become a trader needs to develop a few fundamental skills. These skills include understanding strategies and statistics as well as dealing with destructive emotions such as greed and fear. Going from knowing nothing about forex to making a living by trading currencies may take time and effort on your behalf but it will pay off. Once you know what you are doing while placing an order you are doomed to succeed. There will be ups and downs but in the long term, you will get there. This is what successful full-time forex traders say. Open an account and start forex trading from home as all it takes is your time and willingness to learn.