The global forex market is a huge financial entity.
One that is continually growing within the sector on a daily basis.
The value of forex increased from $5.1 trillion in 2016 to a daily trade value of $6.6 trillion, with this trend largely driven by technological advancement and a rise in the number of part-time traders. However, it’s also important to note that some 70% of forex traders actively lose money over time, so being able to access the market doesn’t necessarily translate into financial gains.
Instead, you’ll need to take practical steps towards achieving sustainable success as a trader. Here are some ideas to keep in mind:
The Importance of Numeracy and Analytical Skills
As with any type of financial market, you’ll need to have at least rudimentary numerical skills and an analytical mindset to identify opportunities in real-time.
This should also be aligned with a keen sense of discipline and determinism, which helps you to avoid emotive trading and understand the underlying laws that govern change in the marketplace.
Remember, we live in the age of automated trading, which leverages advanced algorithms to identify viable entry and exit points. Such algorithms are based on intuitive analysis of the forex market, so having an in-built skillset of this type can help you to gain a competitive advantage within this space.
#2. Understand the Importance of Strategy
While an analytical mind may help you to identify opportunities in the marketplace, this means little unless you have a targeted approach to finding the right opportunities and entry points.
This requires you to have a clearly defined forex trading strategy, ideally one that suits your wider investment philosophy and appetite for risk.
For example, risk hungry and knowledgeable traders who want to leverage the market’s innate volatility to their advantage can leverage scalping and day trading strategies, with a view to achieving relatively small profits from a high value of short-term order. You can also use spread betting to speculate on individual price movements, optimising the value of such trading strategies.
Conversely, swing and position traders hold open positions for days, weeks and even months in some cases, offering more time for research and enabling risk-averse traders to find their way cautiously.
#3. Manage Expectations and Risk
In addition to effective money management, you’ll also have to manage risk and your expectations to be a successful forex trader.
Fortunately, online brokerage sites can help with the former, by allowing you to establish so-called “stop losses” that automatically close positions once they’ve incurred a predetermined level of loss.
In terms of expectation, it’s imperative that you understand the risks and volatility associated with forex trading, while there’s no fool-proof way of guaranteeing success in any investment marketplace.
Remember, traders are statistically likely to lose more than they win, and you’ll need to accept some losses as being inevitable while taking steps to minimise their extent learning from your failures over time.
