The things you need to become a successful forex trader

“How to make money with forex” is probably one of the most frequently asked questions not only among those who are only learning the ropes of financial markets but also trading “veterans.” A lot of people believe that there is some type of holy grail or a magic recipe for that. In a way, they have a point. The formula or the holy grail, if you will, does exist. However, it really isn’t that much of a secret.

In today’s article, we shall explore the main components and cover the key parameters of successful forex trading. Make sure to share your feedback and experience, and feel free to ask any questions in the comment section.

Contents:

1. Benefits and drawbacks of the forex trading
2. TOP 4 pillars of forex trading success
3. How to pick the right broker
4. Education: TOP free sources
5. Fundamental and technical analysis: What to pay attention to and how
6. What trading strategy to pick
7. How to analyze forex trading

Benefits and drawbacks of the forex trading

What makes forex so alluring? It’s because it has loads of unparalleled advantages.

Forex plus points:

These factors appeal to those who are looking for additional sources of income. After all, trading can serve as both a financial pillar you can rely on and a full-fledged business. With that said, trading does have several drawbacks as many assume.

Forex downsides:

Learning to trade forex is one of the main preconditions for success. After all, nobody gets discouraged when they need to get proper education in order to succeed in the field of programming, medicine, architecture, etc. Forex is no different in this sense. However, the good news is, this doesn’t imply decades of classes and pulling all-nighters. You can study whenever you’ve got the time and put what you’ve learned into practice right away. But we shall touch on this a little bit later.

Another drawback is that you have to have a stable Internet connection. But that’s not so problematic either. In our day and age, it’s hard to come across those who don’t use the Internet in their work and daily life. Even cleaning personnel watch YouTube videos to learn the latest cleaning hacks.

Some might wonder why we don’t mention that trading is a risky affair. We do not deny that there are significant risks involved when it comes to financial markets. But the thing is, trading allows the traders to control them. It’s all in the person’s hands. Although taking responsibility for their own actions may seem intimidating to some.

If this does not apply to you, we shall list all the necessary steps that will help you to conquer the forex market and make money after opening a trading account.

TOP 4 pillars of forex trading success

Let’s consider the essential elements to succeeding in forex. We shall do that by walking the path of the newbie. This is basically a success roadmap to help you figure out what stage you are currently at and plan out your next steps from there.

Trading path	What you need to do	Subtle aspects
Choose your broker	Analyze the existing forex companies and pick the one that meets your specific needs. Avoid so-called forex kitchens	Comments and ratings cannot be completely unbiased. That’s why the best way is to make your own analysis and discuss every detail with the broker directly.
Complete the training	Choose the relevant training course/mentor according to your requirements.	Free training is going to help you understand whether trading is something that works for you personally and acquire basic knowledge. The mentor and a more in-depth training course can help you avoid common mistakes made by novice traders.
Perfect your strategy	Develop a clear-cut trading plan where you outline the assets, signals, and other vital details. That’s the only way to make a fair amount of money. There’s no point in entering the market otherwise. If you are scared, it doesn’t make sense to start.	Having a proper plan is the cornerstone of success in any affair. And trading is no exception. Luckily, when it comes to trading, you can test out and adjust this plan without putting your trading deposit at risk.
Open your first trades and start making money	Put what you’ve learned into practice and stick to your trading plan at all times.	Every trade you make provides you with new experience and essential statistics. It’s just like with any other job—you build your skills and expertise as you go.

Speaking of which, you can manage to complete this path within several months if you approach this matter responsibly. The timeline of your first trade depends solely on you and the effort you put into it.

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How to pick the right broker

Forex trading is impossible without the involvement of the brokers. Experienced traders claim that having a reliable broker is practically half the battle.

All of the brokerage companies can be roughly divided into two groups—STP brokers and forex kitchens. Here’s what makes them different.

	STP broker	Kitchens aka Forex scams
Trades	The trades are sent directly to the interbank market and do not “vanish.”	The trades are processed inside the company. It’s not uncommon for the trades to “vanish.”
Quotes	Market quotes are received directly from the liquidity provider.	The quality of the quotes is not guaranteed. The figures can be baseless.
Order execution	Instantaneous.	Possible delays.
Scalping	Favorable thanks to the fair quotes and instant execution of the trading orders.	Unfavorable due to unchecked quotes and delays in terms of opening and closing of the trades.
Service quality audits	The trades are audited by independent experts. Any possible claims are reviewed by external financial authorities. The traders can also expect to receive monetary compensation.	The trades are not audited by anyone and so there is no way to raise claims should a dispute arise.
Support	The company offers its unique services and software solutions that help its customers to trade profitably and safely.	There are barely any or no services and tools provided by the company since it has no interest in helping its customers earn consistently.
Profit payout	Within the agreed time frames, without any delays and additional issues.	When a lot of traders start making profitable trades, the company is forced to use its own money to pay out the profits. So, the issues associated with the withdrawal of funds from the account are not uncommon.
Deposit replenishment	Safe and proven account replenishment methods.	There can be unsafe ways to replenish the account, e.g. via SMS.

One of the major differences between STP brokers and kitchens is the order execution method. When your orders are sent directly to the interbank market, you get real—current—quotes. You are working with the same liquidity and volatility as your fellow traders in Australia, America, or India.

The quotes are sensitive to news, and by taking advantage of their movement you can increase your trading deposit. In contrast, kitchens take a slightly different approach. The quotes can be executed within the company, i.e. the counterparty is not based in the interbank market. This means that volatility and quotes essentially depend on the company, and not the overall market environment.

Education: TOP free sources

Fortunately, you don’t need to have a degree in economics to trade forex. What’s more, some of the best traders are virtually no financial experts:

• William Delbert Gann, the author of the technical market analysis several popular indicators were based on, was a warehouse loader.
• Charles Doe, the “father” of the Dow Jones index was a journalist and developed a fascination for trading while writing the economic news column.
• Alex Gerchik, president at Gerchik & Co and the safest Wall Street trader according to the Mojo Wall Street Warriors started his trading journey as a cab driver. He completed stock exchange courses, started out with as much as $400, and is now managing million-dollar accounts.

As you can see, there are plenty of examples. You too can become a trader if you have enough determination.

But the question is, where and how do you learn to trade forex? You don’t have to start with paid courses right away. There are loads of other ways to acquire basic knowledge without spending a penny.

Training options	Benefits	Drawbacks
Books on forex	Extensive fundamental knowledge from the top market experts. Information is available anywhere, any time.	Typically, the language of these books is more complex which can be a problem for the newbies.

 

Training options	Benefits	Drawbacks
Webinars	Ability to explore theory and practice. Speakers use screenshots to illustrate cases.	Webinars are typically hosted in real-time, so you would have to plan your schedule accordingly to not miss it.

 

Training options	Benefits	Drawbacks
Articles	They cover specific topics you are interested in.	Could be less informative since they cannot touch on every aspect of the topic under discussion.
Chatbots	You can take online courses in the messenger app of your choosing.	Require Internet connection, so traveling to a desert island would not be an option.
Apps	Webinars, articles, and tips from pro traders on your phone.	You need to download them on your device so make sure to have enough space.

You might be wondering which training format to pick. Ideally, you should combine all of them to achieve the best results. As evidenced in practice, if you put a lot of effort into studies, you can already start making forex trades in 1-2 months.

Fundamental and technical analysis: What to pay attention to and how

Trading success resembles an iceberg. 10% is what you see on the surface—opening and closure of the trades, and the remaining 90% is what goes into it, i.e. extensive market analysis. So, how can we analyze markets to see them as a source of income?

There are two types of market analysis—fundamental and technical. Let’s compare them.

With that said, you don’t have to choose between the two. The real pros typically use both fundamental and technical analysis.

Below are the economic data that must be factored in when making a fundamental analysis:

Keep in mind that a certain portion of the data is the forward-looking figures that may point to an upcoming economic improvement or decline.

E.g. If household spending figures drop, it means that people are trying to cut back their expenses. This, in turn, will result in the manufacturing industry and service sector performance decline. The increase in the number of those applying for unemployment benefits and a decrease in the number of employees—non-farm payrolls that are well-known and loved in the trading world—can also imply the general economic weakness.

What tools can we use when doing the technical analysis

With that said, you don’t necessarily have to use indicators. There are many traders who rely chiefly on support and resistance levels as far as their trading strategies go. They are known as non-indicator strategies. If you wish to learn more about other strategies, then keep on reading.

What trading strategy to pick

You have probably heard people say that FX trading is just like gambling. But as a matter of fact, those who believe in that statement have no idea what real trading is all about. The cornerstone of trading is an accurate calculation, logic, trading strategy—not a blind chance.

Profitable strategy is the very precondition for consistent profits, and choosing the right trading system is by far one of the most crucial things to tackle if you are a novice trader.

What is Trading Strategy (TS)

A trading strategy or system is essentially a set of rules used by traders to manage their trades. Put simply, these are specific conditions in which traders choose particular assets to trade, open and close positions, take profit, and limit risks.

The strategies can be roughly arranged into several categories depending on a chosen parameter:

• Based on trade duration: scalping (ultra-fast TS), intraday, medium-term and long-term ones.
• Based on market analysis: indicator-based and non-indicator TS the core of which is fundamental and technical analysis.
• Based on market trend: trend trading strategies where positions are opened in the direction in which the market moves and countertrend ones where you trade price rollbacks.
• Based on trade management: manual TS where traders trade on their own and automated ones with robots or Expert Advisors that enter and exit trades instead.
• Based on reward/risk ratio: conservative TS with the smallest profits but without any major risks, moderate and aggressive ones which imply high risks in order to snatch maximum profits.

Where do you get a forex trading strategy

You can basically develop one yourself. However, that’s not an easy task. Not every experienced trader uses unique strategies. A lot of people prefer to borrow someone else’s trading system which has proven to be effective.

We recommend that you choose the strategy given your needs. First things first, figure out how much time you are willing to spend on trading, what assets you feel most comfortable trading, the amount of profit you wish to make, etc. By analyzing these aspects, you can choose the strategy which will be best suited to your trading approach, lifestyle, and mindset. And don’t fret—there’s one perfect strategy for everybody!

How to test the strategy

Testing the strategy on the live account is the worst thing you can possibly do unless you have a couple of free trading deposits that you are willing to waste. A much better way is to use a demo account that unlocks free access to the live market.

Once you acquire enough skills practicing in the demo account and polishing your strategy, you’ll be ready to switch to the live account and live forex trading. Now, the question is, what amount of money should you start trading in the live account with?

Some people believe that newbie traders should go with a minimum deposit, i.e. $100. However, the experts do not share the same view. From a psychological perspective, it is much easier to trade a larger sum of money. When the volume of trade is 3-5% of the entire amount in your trading account, you don’t risk as much as when you open a position using your whole deposit. This is why a $500 deposit is considered a more suitable option.

Also, keep in mind that the way you perceive trading when it comes to demo and live trading is not the same. When there is no real chance of losing money, you don’t approach risks with the same caution. You can even let yourself break the rules of your trading strategy a couple of times and give in to the thrill of gambling knowing that the deposit is virtual. You obviously mustn’t do that but newbies have a hard time resisting the temptation. When it comes to making real trades, you should follow risk management rules religiously.

The rule of thumb that Alex Gerchik likes to refer to says,

“Not losing money is already a win.”

But how do you develop proper self-discipline for that? That’s where the trading plan comes to the rescue. Essentially, this is a step-by-step instruction that includes:

1. Trading strategy.
2. Rules for opening and closing trades, i.e. a list of signals to enter or exit the market.
3. Risk management: maximum number of losing trade per day, risk per day in percentage, etc.
4. Money management: your rules for increasing the profits.
5. A clear game plan for non-standard situations i.e. what you are going to do if your Internet is down or unexpected news is released causing a major stir on the market.

The trading plan consists of the following core elements:

By having a trading plan, you’ll be able to trade consistently and not rely on a stroke of luck and thus random profit.

Your first-ever trade may turn out to be super successful—everyone knows about beginners' luck phenomenon—or it can fail royally which is also fine. Whatever the case may be, you need to keep your emotions under control. Don’t let euphoria after a successful trade or despair and desire to bounce back after a failure get the best of you. Only unbiased calculation of all variables and thorough analysis of your actions can help you hit your second, third, hundredth, and thousandth trade and make consistent profits.

How to analyze forex trading

Is there an efficient way to analyze trades? Yes! You can use the table shown below:

Trade

Parameters

Entry point

Reason for entry

Exit point

Reason for exit

Outcome

Comments

What can be improved

This article is just a general guide for the newbie traders. There are obviously many more subtle aspects and nuances which you will learn while undergoing your training and practicing. Have a successful start in financial markets!By doing this homework at the end of each trading day, you will be able to identify your advantages and weaknesses, work on them, and evolve as a trader.

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