Becoming a forex trader means living and breathing the excitement, risk, and reward of trading in the biggest and most liquid market in the world. Do you have what it takes? In this piece we’ll explore how you can become a forex trader, revealing the qualities you need and the processes to follow to get started and be a consistent trader.
WHAT DOES A FOREX TRADER DO?
A forex trader takes long or short positions on currency pairs with the goal of making a profit. A forex trader is strategic, disciplined, and always switched on to the markets. Whether focused on a technical or fundamental approach, or both, he or she will be looking to build an understanding of currency pairs’ behavior and set up profitable trades.
In the 24-hour currency market, trading never sleeps, meaning there will always be active, although forex liquidity levels will peak and trough at certain points around the clock. Some traders may wish to operate in unsociable hours to put them in a position to capitalize on international markets.
THE ULTIMATE CHECKLIST TO BECOME A FOREX TRADER
Now you know what qualities you need, it’s time to understand how to be a forex trader from a practical standpoint. Here’s the checklist:
1) Find the right broker
Choosing the best forex broker will make all the difference when it comes to benefiting from quality of user experience, reliable client support, and competitive pricing.
2) Know how trading capital works
As a forex trader, you must understand margin and leverage. Margin allows a trader to open leveraged positions, meaning greater exposure to the market with a smaller capital outlay. Newer traders often look at the unused margin as buying power and therefore tend to be too aggressive in their position sizing. Leverage maximizes gains and losses making your account equity quite volatile. Regardless of the amount of leverage your broker offers, we suggest using little or no leverage in your trading.
3) Start with a demo account
Practice with a demo account to familiarize yourself with the markets. From here, you can build and refine a trading strategy, get comfortable with your chosen platform and build the confidence you need to trade real money.
4) Take the plunge
Trade small with your real money account at first, and work your way up. Trade with risk management protocols in place, using stop losses, and only trade when you have undertaken in-depth analysis, whether trading fundamentals or technicals or both.
5) Never stop building your knowledge – and character
Winning traders never stop learning and building their expertise in key markets. You should know your selected currency pairs inside out, which technical factors are relevant, and how market events shape the movements of certain pairs. Recording your trades in a trading journal will help you assess your performance and be in a position to constantly review and reassess your approach.