Tips for Success in Forex Trading

These concepts from an experienced trader will help you succeed in Forex.

Our highlight trader is Ebuka Ambrose, a qualified trader with over 2.5 years of experience. He has anchored numerous educational events, both virtual and physical, for OctaFX. Here is one of his latest Q&A sessions with Ozo.

Understanding Forex Trading

What is forex ? Forex simply means foreign exchange. The Forex market is a global market where currencies are exchanged or traded. It is the largest financial market in the world, with a total daily liquidity of $6.6 billion. This means that at least $6.6 billion is traded in the Forex market every day. Can you imagine that?

Consider the currency exchange we make when we travel abroad. You sell the currency of your home country to get the currency you will need in your destination country using an exchange rate.

The main objective of Forex trading is to buy or sell one currency against another currency for profit.

But how to make profit by buying and selling currencies? The answer is basic economy.

Supply and demand

Currencies fluctuate based on supply and demand as exchange rates are subject to volatility. You profit when you profit from the difference in value of a currency when we buy versus when we sell, and vice versa.

For example, if you buy $100 of US dollars at the rate of 500 Naira to the dollar, you have bought for 50,000 Naira of US dollars. If you were to sell the naira later, when the exchange rate jumped to, say, 600 naira to the dollar, your $100 would now be worth 60,000 naira and earn you 10,000 naira in profit.

You’ve heard the phrases “Buy low, sell high” or “Buy low”. Understanding market conditions and their implications for currency fluctuations can improve the accuracy of your predictions of market movements. This is how you make profits in Forex.

Tips for Success in FOREX Trading

Avoid unreasonable expectations

The Forex market is a market with high liquidity, so it is imperative that you approach it with a practical mind. You want to set realistic goals and keep fear and greed out of the equation.

Trading is an art and should be approached as such. There is a steep learning curve with rewards at the end. While you can’t become a master in a few weeks or months, the good news is that mastering Forex trading is definitely achievable.

Watch this video that compares Forex to different art forms.

Know thyself

The best forecasters in different industries are usually the most self-aware people.

Key: Spend considerable time in conscious introspection.

Knowing the kind of person you are informs about your goals, expectations, and trading style. This is an important thing to keep in mind as you want to assess the risk profile of the trading strategy you choose. Can you bear the risk of loss for extended periods at a time? You are likely to adopt long-term trading, leaving your trades for weeks or even months. Are you unable to fall asleep without closing a trade? You will probably embrace day trading.

Define your goals

Your success in Forex trading is determined by you and only you. An important step before trying to measure your trading success is to determine what exactly success means to you. Setting a clear goal helps you make calculated moves to get there.

Bonus Tip: It helps if you print out your goal and visualize it.

You need to know if your trading methods are conducive to your goal.

Enjoy your little beginnings

The initial learning phase of Forex trading should not be rushed. You should invest your time more than your money in this phase. Strong foundations make for strong structures, so take the time to understand the basics – terminology, trends, orders – before you focus on learning how to analyze the markets. Although the majority of trading knowledge comes from trading and experience, a trader should know everything about the Forex market before diving into it. This includes geopolitical and economic factors that can affect your preferred currencies.

Don’t make rookie mistakes

Continuing to trade without first understanding the market, or giving in to greed or irrational FOMO, among other popular beginner mistakes, will have you losing your trading capital in no time. It is a well-known rule that one should only risk 1-2% of your trading capital on a trade. Likewise, you should always implement appropriate risk management tools in your trading, such as stop-loss and take-profit orders. Remember this and the forces will be in your favour.

Analyze like a learner, not a pro

Research by Tetlock and Mellers shows that there are two types of forecasters: one who generally adjusts ideas in light of unexpected events; and the other kind that rarely does. While your trades should always be backed up by comprehensive analysis, it is important to critique your analytical frameworks from time to time. People who are good at predicting market movements keep an open mind when it comes to their beliefs. To be a great Forex trader, you have to be quick to accept it when you’re wrong and not let your ego get in the way.

Research, practice, repeat

In addition to often criticizing your analytical methods, read and do research! No one succeeds without opening their mind to knowledge. Benjamin Franklin once said, “An investment in knowledge pays the best interest. In other words, it is important to have adequate knowledge of the Forex market to help you make informed decisions when trading.

Learn about the latest market trends and what industry professionals love. Find educational content. To get started, head over to the education section of the OctaFX website.

Test strategies using your DEMO account. Never upload without testing or while testing a strategy. Trading on a practice account will immerse you and give you insight into the strategy before you are confident enough to trade using a live account.

Document everything

Keep a trading journal in which you document your entry and exit points and the insights that led to those decisions. Pay attention to emotional reasons like anxiety, greed, fear and write them down. Studying past trades gives you insight into your behavior, your methodology, how often you stick to your strategy, if your strategy is really working, and how to tweak it all for increased profit. This way, you will develop the emotional stability needed to follow your trading plan.

Always review your strategy

Calculate the reliability of your current system. Choose your last 5-10 trades to measure your profits and losses.

Keep in mind that leverage is a double edged sword

Traders use leverage to increase profits from Forex trading. Leverage is basically borrowing capital from a broker, which gives a trader the advantage of buying and selling more currencies. Understanding that while leverage can increase your profit ability, it can also magnify your losses is a first step in navigating this concept. Forex traders implement strict trading strategies which include the use of stop loss in order to limit their potential losses, as well as moderate and conservative lot sizes which can give good profit and minimize margin loss.

Prioritize capital protection over profit

Being one of the most actively traded markets in the world, Forex presents amplified potential risks for traders compared to other markets. Recovering from a loss is much more difficult than increasing your trading balance. In order to avoid losing money in the forex market, do your homework and find a reputable broker. Minimize risk and increase the odds of winning in your favor when testing analytical techniques using a practice (or DEMO) account. Treat your trading like a business by documenting everything and staying in the profit zone. The moment you start experiencing constant losses, your business has failed. Avoid failure by using proper money management techniques and controlling your leverage.

Choose a reliable broker

You want to trade with a broker that gives you the opportunity to use your trading skills effectively. There is a lot of uncertainty around the Forex market, and frankly, your broker shouldn’t be one of your headaches. Finding a broker with all the right tools to confidently access the Forex market is a skill in itself. Ideally, you want to go with a broker that has been around long enough to learn from its own processes, that has changed and continues to change its operations to meet the needs of its users. OctaFX is a reliable broker with over 10 years of experience in developing the perfect trading tools for ambitious Forex traders. When it comes to innovation, speed, education and promotional offers, OctaFX comes highly recommended.

Gregory Mankiw in his Principles of Economics describes this important principle:Trade can make everyone better.‘ Hoping that you will seize this world of opportunities with Forex trading. Being profitable in the Forex market goes beyond the trading strategy used. It is determined by a host of other factors: commitment, consistent practice, patience, understanding of the risks, insight, and ultimately, confidence in yourself and your broker. It takes about the same input and time required to master any other art form. You too can join the thousands of people who are gaining financial freedom through Forex trading. Mastery looks like you!

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