To become a successful Forex trader all you need is to carefully watch the market trends, patterns, global events and market psychology.
In the fast-growing tech world, everyone with minimal knowledge of technology can become a Forex trader. Those days are gone when you need to consult a financial expert or take offline classes to learn about the FX market. Now almost 100% of the educational materials are available online to begin the journey in the Forex market. Thanks to the internet!
However, when it comes to making a profit in the FX market all you need is patience and a bit of experience. To become a forex trader you must know the science behind the market. Bear in mind, those with the right skillsets and knowledge can only make consistent profit in the Forex market. You can learn those skills either by following some of the educational blogs or taking online courses. Meanwhile, apply that knowledge by practicing via demo account or start with a minimum deposit with the reputed FX broker.
This guide will help you to become a successful Forex trader. Let’s dive deep into it!
6 Simple Steps to Become a Forex trader
1. Know about the Forex Market
Before you began to directly trade the currency pair, you must have a basic understanding of the market. First, discover the basics of FX trading. Choose from a range of topics which include; how to read charts and patterns, how to use leverage in trading currency pairs, best currency pairs to trade, how to set a stop-loss and target, margins and spreads, lots in the forex market, etc. These basic terminologies may help you to acquire some knowledge.
In the forex market, global events play a very crucial role that comes under fundamental analysis. For the beginner traders, it is challenging to understand the technical terms in the beginning. But the regular market watch may help you to understand it at a very fast pace.
Most probably you’ve heard of the term “technical analysis”. Technical analysis is the framework in which forex traders study price movements. It is a historical representation of what happened in the past, which determines the current trading conditions and future price movement of the FX pairs.
Follow this post to know ways to learn Forex trading: How to learn forex trading – Beginners Guide
2. Find a reliable Forex Broker
One of the most challenging tasks for the beginner is the find the most reliable FX broker. As the market emerged lots of scam forex brokers are there in the market. One of the easy ways to find the most reliable broker is to check the broker’s regulatory license.
Additionally, answers on Quora and Reddit might also work. To begin with, choose a broker with a minimum or zero deposit. There are some brokers that provide no deposit online account opening. This will be helpful for beginners to start with.
3. Knowing Trading Capital
It might sound shocking to know that you need not require huge capital investment to trade Forex. Traders usually do not require enormous money to start with. They can use trade on margin. It means the amount of capital that is required in your trading account to open a position.
For example, if you want to open a position of say $500,000 then $5,000 of deposit fund is required for a 1% margin. Some brokers might even require as low as $50 to open an account and begin FX trading.
4. Start with Demo trading
It is always a good choice to start with demo account with the broker. This will give you an opportunity to develop your trading strategy, practice, and increase the confidence level. With a demo account, you get to know about the most popular trading platform of the FX market i.e MT4 trading platform. Almost 95% of the Forex traders use the MetaTrader 4 trading platform for trading in Forex.
Moreover, the demo account may also give you an ideal time to familiarize yourself with various trading instruments which you might not know.
Demo trading also give you an experience of capital loss from trading and gain a better understanding of live trading. It’s like a simulator practice before a pilot flies the plane in actual.
This period should not be rushed and done with leaning gaining theoretical knowledge of the market. You must trade on a demo account till you make a steady profit with virtual money. This will pay you later while trading in live account.
5. Start with Low deposit in Live account
A big success always comes with taking small steps. If you want to become a successful forex trader you need to start small. After practicing for a few months, use the trading strategy which you’re most comfortable with. There are thousands of trading strategies that you can choose from. Choose the best trading strategy which you feel most confident with and start to trade with some money that you afford to lose.
6. Choose suitable Forex pairs and Forex Indicators.
It is vital to start with a currency pair that you’ve become most comfortable with while trading in a demo account. Most of the professional forex traders have their selected FX pairs which they become expert at. However, testing out different currency pairs is worthwhile in the beginning. But in the end, you should stick to one or two FX pairs and become an expert with it.
Additionally, use an economic calendar to get to know about the current events and news announcements. Become comfortable with the chosen technical indicators. This can help you to identify the patterns and help you to predict future price movements.
Yes, you can start trading in forex market at $10. However, you need to check the broker for the minimum deposit which they require to open an account.
Estimate, with an average 5 pip profit and 10 trades per day with a micro lot of $1,000, the FX trader will earn $5 a day.
Yes, it is difficult for beginner traders to gain momentum without less or no experience in the market. However, after moderate practice and experience, one can make a decent profit if he/she applies fundamental and technical analysis smartly.
It is safe until you fall into the trap of a scam forex broker. You need to be very careful while opening an account with the forex broker.
Some of the best books for beginner forex traders are Currency Trading for Dummies, by Brian Dolan, Day Trading and Swing Trading the Currency Market, by Kathy Lien and Forex Trading: The Basics Explained in Simple Terms by Jim Brown.
According to Bank of International Settlements (BIS) triennial survey, which was last taken in April 2019, these are the most traded FX pairs in the world.
– EUR/USD (euro/US dollar)
– USD/JPY (US dollar/Japanese yen)
– GBP/USD (British pound/US dollar)
– AUD/USD (Australian dollar/US dollar)
– USD/CAD (US dollar/Canadian dollar)
– USD/CNY (US dollar/Chinese renminbi)
– USD/CHF (US dollar/Swiss franc)
– USD/HKD (US dollar/Hong Kong dollar)
– EUR/GBP (euro/British pound sterling)
– USD/KRW (US dollar/South Korean won)