Start Your Forex Trading Career in 6 Steps
While there is no Holy Grail or formula to being consistently profitable (it depends on the trader’s personality, discipline, and ability to learn), I can walk you through a process that you could follow:
1. Learn the basics of .
A boxer doesn’t score a knockout with just his fighting spirit. He studies the scoring system, how his opponent moves, the punch combos and strategies available to him, which all combined, gives him better opportunities to win the match.
At the very least you should know what pips, leverage and risk management are, as well as how broker execution and spreads factor into your trades. Study the industry, its major players, and the factors that move currency prices
2. Learn to recognize patterns.
Just like athletes recognize patterns by watching tons of tape, you should also look at A LOT of forex price action to develop the skill of recognizing patterns.
Depending on your desired time frame, you could be looking at months or even years’ worth of charts before you can easily recognize basic patterns such as breakouts, trends, and ranges.
Remember that trading is NOT a get-rich-quick scheme. You need to invest time, effort, and yes, a bit of moolah if you want to be consistently good at a high-performance endeavor.
3. Develop a trading system.
This is the part where you start designing your own combos. Try trading different currency pairs, technical indicators, time frames, and risk management strategies to find the ones that fit your trading personality and resources.
You can try others’ strategies as well but remember that just because a strategy worked well for one trader doesn’t mean that it will work for you.
Once you identify the factors that give you more wins than losses, you can piece together your own trading system. It can be as simple as entering and exiting trades at major levels or as complicated as taking trades only when an SMA crosses a Bollinger Band while your cat dances to YouTube videos.
4. Trade on demo.
I know a lot of profitable traders who skipped the demo part and proceeded to live trading. After all, trading becomes a whole new ball game when real money is at risk. However, demo trading allows you to not only test your trading system for profitability, but also hone your skills without the pressure of making profits.
This is where you learn to identify weaknesses of your system as well as the major trading issues you need to work on. If you can’t make money while trading demo, then you definitely shouldn’t move on to live trading.
5. Learn to think like a trader.
In trading, you don’t get extra points for having the most unique take on the markets. Being right won’t automatically translate to being profitable either.
What’s more important is accurately anticipating how other traders will price in new catalysts and identifying sentiment shifts when (or before) they happen.
This skill requires you to think like a trader. You can start by visiting popular trading blogs and forex news sites. Listen to trading podcasts and watch live trading videos. Participate in trading communities and don’t be afraid to ask if you have any questions.
Learn what’s important to forex traders like you and you’ll soon anticipate their reactions.
6. Track your progress.
This is the hardest but most important part of the process. This is where you work on your system’s consistency in profit-making. Establish goals, targets, and performance metrics so you can measure how effective your system is and how effectively you execute it.
A trading journal is highly recommended at this point because it shows you which factors work and which ones don’t. Deliberate practice further speeds up the process. You have to stick to your original rules long enough give it a chance but don’t hesitate to fine-tune it if the data supports a change.
Currency trading is not a life hack that makes you instantly rich. It’s also not a game with universal cheat codes to make the game easier. It’s a business and, like any other business, it requires time, money, a little bit of luck, and most importantly, consistent preparation to be successful.