9 How to Become a Successful Forex Trader • Benzinga

Trading foreign currencies may look like an easy way to make money since you just need to buy low and sell high to do that. However, the nuances of knowing when to buy and when to sell are often much harder to discern. In practice, learning to become a successful forex trader generally involves a significant amount of perseverance, dedication, research, testing and learning from losing trades. Even then, you may not achieve the consistent profitability that counts as success to a forex trader.

In the following article, Benzinga explains what things successful currency traders typically do and what steps you can take to achieve success trading in the forex market. Keep reading if you’ve ever wondered what most consistently profitable forex traders have in common.

What Does it Mean to Be Successful in Forex Trading?

When you think about forex trading as a business, then success in forex trading comes down to one very basic thing: net profitability. Fortunately, your profits or losses seen when trading forex seem pretty objective and easy to measure.

Still, you will also want to take into account your valuable time taken, the degree of effort you need to expend and the cost of any training, services or equipment you need to purchase to facilitate your forex trading business.

Another vital element to successful forex trading is consistency. You really want to develop a trading system that you can trust to generate consistent and attractive gains over time to justify the effort and expense required to follow it.

9 Top Things Successful Forex Traders Do

The main thing a typical successful forex trader does is make profitable trades on a consistent basis. Despite that, a trader can be profitable overall even if most of their trades lose money as long as they cut their losing trades quickly and let their profitable trades run further.

Also while trading forex can be quite lucrative, keep in mind that most people who begin trading forex lose money. As a result of this disappointment, many of them eventually abandon forex trading altogether as a means of making an income.

If you’re an aspiring forex trader, you should first take a quick test to determine if your trader personality type is suitable for successful trading. You should also do a realistic self-assessment to ascertain if you have enough available time to devote to forex trading.

You’ll then want to invest some time into developing a successful trading system that suits you well psychologically and that you have the discipline to stick to. When you start trading in a live account, you will also need to develop the emotional detachment and strength of character to take real financial risks and cope with losing trades.

To further help you start trading forex, successful trader habits to cultivate include the nine top things listed below. While following these general tips can definitely help you improve your forex trading skills and profitability, determining how to be a successful forex trader takes time and typically also depends on your individual psychology and preferences.

Get Educated on the Forex Market

The first step any aspiring forex trader should take to properly prepare themselves to start trading currencies is to get some decent forex training. At a minimum, this should include learning about the mechanics of forex trading and what moves the market. For example, you can take free or paid forex courses online, as well as read books written by experts on the subject. You can also enlist the services of a professional forex trader mentor to look over your trading strategy and trade journal to suggest improvements.

Decide Your Time Frame

You will need to decide on the best trading time frame to operate your chosen strategy in, whether that be a 5-minute or 1-week trade time horizon, for example. Your trading personality type might impact this choice, as might the amount of time you have available to sit in front of your computer watching positions.

Pick a Methodology

You’ll definitely want to pick a specific trading strategy or methodology to operate under when trading forex. This helps give your trading efforts the structure you will need to become consistently profitable. For instance, some technical forex traders prefer to follow objective trading signals like buying at support levels and selling at resistance levels, while others prefer might prefer to trade on classic chart pattern breakouts.

Choose Market Instruments

Not all strategies work well on all currency pairs, so you will need to select the best currency pairs for your chosen trading system based on historical backtests and real-time demo account testing. You might also want to add derivative instruments like currency options to your trading system once you get more sophisticated.

Stay Patient

Once you have a well-tested forex trading system in place and are getting into the feel of trading, it is vitally important to remain patient with the market. Try to wait calmly for the market entry and exit points that your system dictates without impatiently jumping the gun by trading too early.

Be Disciplined

Being disciplined about following your trading strategy helps you achieve the consistent trading results you will be aiming for. Make sure you stay firmly disciplined when it comes to following your trading strategy’s guide for trade entry and exit points.

Emotional Detachment

Emotions can be the bane of successful trading, so remember to remain objective and stay as emotionally detached as possible when trading forex. It can help to reduce your emotional involvement when trading forex by having an objective trading system that generates well-defined trade entry and exit signals you can follow in a disciplined manner.

Have Realistic Expectations

While most people would like to get rich trading forex, it helps considerably to have more realistic expectations of your likely profit potential. You can usually achieve this by backtesting your forex trading system on historical data and then demo account testing your trading system before attempting to follow it in a live account. If the strategy still looks good after diligent testing, then you can have a reasonable expectation of its future success and determine if achieving that sort of return will justify your time and expenses.

Implement Risk and Money Management

Incorporating sound risk and money management into your trading plan is virtually essential for your long-term success as a forex trader. For example, you will want to have a backup plan to be able to manage your positions in case your trading system goes down. You will probably also want to size your positions in a manner suitable to your risk tolerance and account size.

Implementing Your Forex Trading Strategy

The first thing to remember when implementing your forex trading strategy in a live account is that not all of your trades are going to be profitable. You might even have to take some time to adjust your forex trading strategy to improve its performance or to account for changing market conditions. Most traders find that keeping a trade journal can help considerably with this refinement process.

Is Forex Trading Easy Money?

While many methods and trading strategies exist for profitable forex trading, not everyone has the patience, time and persistence to become consistently profitable trading forex. Keep in mind that the learning and effort involved in coming up with a well-defined and consistently profitable strategy can overwhelm many people.

If you find yourself in this category, but you still wish to participate in the forex market, then social trading or a managed account might be reasonable alternatives you can use. Social trading lets you copy another trader’s transactions in your own account while having a managed account involves hiring an experienced account manager to trade forex for you. These options let you participate in the forex market without getting directly involved.

Remember that forex trading is a strategic, speculative activity that has far more in common with gambling than investing. Trading forex involves taking significant financial risks that are just not suitable for everyone.

Accordingly, you will first want to have enough capital to put at risk to make forex trading meaningful for you. You’ll also want to make sure you know yourself and how you react to positive and adverse financial events since forex traders generally need to keep a level head in the face of substantial account value shifts.

Testing your trader personality type and starting out in a demo account with a commonly-used short-term trading strategy would probably help determine whether you’re emotionally suitable to trade forex or not. If you’re successful with that demo trading experiment, then you could develop that strategy further to enhance its profitability or branch out into other strategy options to come up with a suitable trading method to incorporate into your trade plan.

Put Your Forex Trading Strategy into Practice with These Brokers

Trading forex as a retail trader requires a reputable, competent and reliable online broker that meets your specific needs to achieve any level of success. Benzinga has taken some of the guesswork out of selecting a suitable broker by compiling the comparison table shown below of the best forex brokers for online trading.

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