Forex trading was seen as a non-conventional and challenging career path in the earlier days. The complexity and risk associated with trading was a turn-off for many beginners who were inclined towards simplicity and stability. However, there has been a major shift in this perspective in the past few years. The success stories of retail traders in the forex market prove that currency trading can be just as rewarding and fulfilling as any other profession or career. You just need to come up with a solid plan and pay attention to risk management by trading with fewer lots. You can also use a lot calculator to find out the right lot size according to your capital.
In this article, I will be sharing 5 practical tips that you can follow to build a successful career in the dynamic forex market. So, keep reading till the end.
- Finding The Best Broker
The first and foremost thing to do for a successful trading career is to find the best broker. One thing to understand here is that the term ‘best broker’ is not about trading with the most popular broker. Popularity can be a key metric for the quality of their services and client satisfaction. Still, your decision should not be solely based on this aspect, as everything that’s popular may not be the best option for all. You need to do extensive research and review the trading conditions different brokers offer before picking the right broker to start your trading journey.
You need to consider their regulatory status, reputation in the market, platform functionality, trading conditions offered and more. Thin spreads, low commission, sufficient liquidity, fast order execution and responsive customer support are some of the things that you need to look for in a brokerage platform. These are the most basic yet essential aspects of a seamless trading experience. If you are someone looking to operate in a specific type of account, then you need to filter your options based on the availability of such an account.
For instance, all forex brokers do not offer swap-free accounts or Islamic accounts, but a Muslim trader will find it hard to operate in a standard or regular trading account. Thus, they will have a preference for brokers who offer Sharia compliant trading accounts, allowing them to engage in halal trading. This way, they can open overnight positions without paying interest or earning from swaps, saving themselves from breaking the rules of Islamic finance, which strictly prohibits interest-based transactions in any situation.
Basically, the best broker for a trader can be defined as any trusted broker that meets their requirements and preferences. Different traders will have different criteria for broker selection based on their goals and trading styles. Thus, you should not choose a broker just because they have a large client base. Before making a final decision, you need to check if they can be an ideal match for you.
- Take your time to learn and Practice
Many beginners make this grave mistake, immediately jumping into live trading without enough preparation. They think they will be able to learn more while trading with real funds, but this decision can cost them a lot in the process of trial and error. Hence, opening a demo trading account would be a beginner’s best course of action. Demo account trading is ideal to hone your skills and develop solid trading strategies that will help you when you switch to live trading. The trading experience on a demo account is very realistic as it replicates real-time market conditions, but you will not be risking real funds in the trading process, which makes you feel at ease.
Besides practising and polishing your skills, demo accounts are also useful for testing your strategies and trading techniques while also exploring various tools and features on the trading platform. You can also review the functionality and user-friendliness of a platform or trading software with demo trading, which helps you choose the best one among the available options. To talk about theoretical learning, you can rely on online forums or reliable websites providing free educational content about forex trading. If you are an avid reader, you can pick some good books to gain valuable insights about trading concepts.
One problem with many new traders is that they stop learning after transitioning to a live account. But the actual learning begins when you get exposed to the market risk. Because you will start experiencing intense emotions while risking real money in trades and learning to manage your feelings is essential for making rational trading decisions. Maintaining a trading journal and conducting periodic reviews for performance assessment is also crucial for tracking your progress and detecting any deviation in time.
- Taking Measures for Risk Management
I will refer to risk management as the backbone of a trading system, as even the best strategy can fail to bring expected results in the absence of a sound risk management plan. On the other hand, a trader prioritising risk management will be able to safeguard their trading capital in any situation, protecting his/her account from huge losses even when the strategy fails to yield good results. Risk management is not about avoiding risk but about limiting your exposure to risk per your risk tolerance and trading goals.
The only risk that you can afford to lose is a golden rule of trading, and this risk percentage can be set as 2% of your trading capital for a single trade. This way, your account balance won’t get affected by individual losses, and you will be able to limit your drawdown even in the case of a losing streak. Setting an optimal risk/reward ratio and employing Stop Loss in every trade are some of the key aspects of risk management in trading. The essence of risk management is preparing for the worst while expecting the best, and this approach leads you to long-term success in trading.
- Mark a Humble Beginning
Many beginners have this misconception that they need to start off their trading journey with a big account and a huge amount of capital. However, it is not advisable unless you can afford to risk such a large amount of money in the first place. Starting small would be the best course of action for a newbie, and you can make use of micro or cent accounts for trading with a smaller amount of capital. Here, you will be able to learn and experience the technicalities of trading without any significant risk. By doing so, you will be able to focus more on the process of trading without being concerned about the results.
You can do the same on a standard account if your broker allows trading with a smaller capital, like $100 or $250. This much money is enough to mark a humble beginning to your trading career, and you can gradually add more funds after gathering enough knowledge and experience in trading. You won’t be able to make a huge amount of profit with a smaller capital, but playing it safe is better than risking it all in the initial phase.
- Stay Updated
The last tip that you need to follow for a successful trading career in the forex market is staying updated with the financial news and events. The Forex market is constantly fluctuating and fundamental forces play a key role in determining the direction of the market. Hence, geo-political news, key economic data releases and other global events can have a huge impact on the currency pair prices. Those who rely on fundamental analysis need to pay a lot of attention to the news and current affairs. But even a technical analyst needs to stay updated with news events to avoid getting caught up in sudden volatility caused by news releases.
Besides staying updated about news, you should also spend enough time to understand the changing market dynamics and emerging trends. You should do some research to find information about modern trading techniques and tools that can boost your performance in the everchanging forex market. Following the same strategy forever may not be the best approach in the fast-moving currency market. You may remain stuck with an outdated system while your fellow traders are moving forward with innovative trading solutions and powerful trading tools. Thus, you need to keep up with them, or else you may get left behind and lose your edge.
Summary
In a nutshell, building a successful and long-lasting career in the forex market is possible for those who are committed to continuous learning and practice. Learning empowers you to make sound trading decisions, and practice enhances your skills for implementing these decisions best. You cannot afford to overlook risk management as a beginner in the volatile space. You need to grow at your own pace instead of trying to copy or compete with other traders.
