There are many different ways to trade forex, making it difficult for traders to find a successful path that works for them. Essential steps towards trading in the currency markets successfully include choosing the right broker and trading strategy that fits the needs of the trader. A good broker will offer no-hassle pricing, making the rate you see the rate you get.
It is a good idea for a trader to research the various currency pairs and to become familiar with the financial markets, including the foreign exchange markets, commodity markets, and stock markets. One should become familiar with leading indices such as the Dow Jones Industrial Average on the New York Stock Exchange and Nikkei 225 of the Tokyo Stock Exchange; leading commodities such as wheat, gold, and silver; leading stocks such as Apple, Google, McDonalds, Microsoft, and Coca Cola; and of course the major currencies: the USD (US dollar), EUR (Euro), GBP (British pound), and the JPY (Japanese yen).
Short Term Success Followed by Failure
Traders who are successful in the short term are often unsuccessful in the long term. Their long term failure is usually due to a variety of factors.
Without developing discipline and remaining disciplined, traders can easily get carried away and give in to their temptations. Traders with discipline are more likely to make wise decisions.
Looking to get rich quick and/or being impatient are also factors that contribute to long term failure. It is very important to be patient because traders who lack patience are more likely to give in to temptations and make impulsive decisions. Consequently they are unlikely to be successful in the long term.
Many traders who rely on luck experience short term success, but long term failure. These traders do not research the market, strategize nor plan ahead. Failing to plan, to understand the market, or strategize is planning to fail.
Traders, especially when starting out, often make the mistake of counting on winnings and not preparing for losses. It is imperative for traders to prepare for losses so that when those inevitable losses occur, traders can recover from them.
Impatience, lack of discipline, relying on luck, and counting on winnings are all financially irresponsible and transform forex, which should be an investment, into little more than gambling. Each factor, alone or any combination thereof, can lead to a trader’s demise.
Tactics for Long Term Success
In order to be successful in the long term, a trader must be disciplined and financially responsible, and implement smart trading tactics. Being consistent, setting limits, and sticking to them are all important for long term success.
Honesty is the most important quality of a successful trader. With this quality a trader can recognize his strengths and weaknesses. A trader who is not being honest with himself often makes foolish financial decisions.
In addition traders need to choose a broker that is regulated and accountable to a credible regulating authority. Further it is important for a trader to build up a relationship with their broker.
Traders need to understand the market, especially market behavior, and have a strategy to exploit it. This can be achieved by following market reviews on a regular basis and researching strategies. Learning from losses occurred and learning how to use online educational tools provided by your broker as well as other tools provided by online trading communities also help traders achieve success.
A smart trader starts slowly and builds up a solid foundation. This is usually achieved by starting small, having and sticking to a robust strategy and not spending more than 5% of their balance per trade.
It is important that traders keep their day jobs and always start with a set amount, making online forex trading an income supplementation plan rather than a sole income plan. Quitting one’s day job and making forex the primary income source should only be a consideration after a trader has built up a regular income over time, based on a solid foundation.
Once long term success has been established, it must be maintained through continued practice of the factors that contributed to the success in the first place. However always remember that market conditions can change at any time and ongoing research, continual learning, and flexibility are key factors in this regard.
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