Almost everyone who aspires to make money online has probably found that it is easier said than done. There are some that have succeeded in multiple fields, and Forex trading is one of them. FX trading requires patience, planning, practice and common sense, just like any other activity to achieve success. There is no beating the market, but instead, one should focus on developing the skills that will make it possible to earn profit from your trades.
How to be profitable in Forex trading
Below are some guidelines that online traders should follow to achieve consistent gains in the Forex market.
Study the Forex market
It is important to acquire as much knowledge as possible about the Forex market if you want to reach success in your trades. Fortunately, Forex brokers such as OctaFX provide you with a bucket-load of resources that are designed to help improve your trading. You can leverage the trading and educational resources as well as the tools that your preferred broker will provide. Most brokers provide market insights, video tutorials and Forex news among other means.
It is also a good idea to take a trading course either through an online webinar, live seminar or trading academy. Doing this will allow you to get a feel for the trading environment and with a demo account you get access to live trading conditions but with virtual money. It means you will not be risking actual cash while you build up your trading skills.
Develop a trading strategy
So you have already involved yourself in webinars and have a demo account. What next? At this stage, you should consider developing a trading strategy that will help you achieve your trading goals. There are many strategies that you can learn online, or you could choose to build your strategy. The latter might be better especially since it will allow you to create a strategy that best works with your schedule.
Traders have a variety of strategies to choose from. For example, you may decide to trade against the trends (reversal trading) or follow the trend. You may also decide to trade as a long-term trader or an intra-day trader. The most important thing is that you are comfortable with your preferred strategy.
Traders usually rely on two main principles; technical analysis and fundamental analysis. Technical analysis usually refers to price chart analysis to determine future prices. The trader uses this principle to predict price movement and then execute trades based on their prediction. This method also involves the use of different analytical tools known as indicators as well as graphical tools.
Fundamental analysis uses economic indicators and news analysis as the base in making trade decisions. This approach helps the trader to determine why prices are moving in a particular direction.
Using fundamental analysis the trader gets a larger macroeconomic outlook, allowing them to execute trades more efficiently. You may choose to use fundamental analysis or technical analysis depending on your preference or even combine the two.
Forex leverage allows you to boost the value of your investment. For example, if you choose to trade $1,000 at a 1:100 leverage ratio, then you can increase your funds to $100,000. It shows just how powerful online trading can be. However, leverage can also be dangerous because you might lose your money very fast if the trend does not go your way. High leverage can efficiently run down your account leaving you with no trading funds.
Come up with a robust risk management plan
As with all investment opportunities, where there is the potential for high gain, there is also the potential for loss. It is therefore vital for any trader to create a risk management plan regardless of how good their strategy is. A risk management strategy will help you minimize losses and most importantly, prevent you from blowing your account.
There are different ways to exercise discipline in your trades. For example, you can limit each trade to about 1 per cent of your entire capital. This approach means you will not incur any significant losses even if you encounter a few losing trades.
Forex trading platforms also provide profit taking orders and stop loss features which are usually automated. It means you can set the exit point for each trade once the price reaches a certain percentage or if the loss reaches a certain point. These features are ideal for cutting your losses and also help you maintain your hard-earned gains.
Get used to the market through a demo account
Many people rush into trading with live accounts and often, they end up blowing their accounts. There is no need to rush into trading before you are entirely sure about your trading strategy and money management techniques. Practising makes a mountain of difference because, at the end of it, you will be able to execute trades more confidently.
It doesn’t matter whether it takes more than a few months of demo trading as long as you gain the necessary exposure that will help you trade successfully once you start trading on a live account. A demo account may be the key successful trading and it is essential Forex training tool. Even seasoned pros will use a demo account to test out new strategies.
Emotions and trading should not mix
Trading emotionally may throw you off your strategy and lead to poor trading decisions that cause you losses. Emotional trading refers to executing trades based on emotions such as anger, faith, fear, and hope. For example, you may lose a few trades and end up executing more poor trades in the hopes of recovering lost funds. A failing strategy might make you angry, causing you to deviate from your strategy and in turn lead to losses.
Another pro tip is to avoid focusing too much on your profits in order to avoid being greedy. Know when to stop and exit the market because you might end up losing if you push your luck too much.
The Bruce Kovner's contemporary Bill Lipschutz turned $12,000 into $250,000 during his university years. However, he lost the entire stake after one poor trading decision, a hard lesson on risk management that he carried throughout his career.
Consider tax laws
The whole idea of trading is to be profitable, and that should not stop at the trading level. You can exploit the tax code of your area to retain more profits. For example, you can claim a trader tax status that will allow you to enjoy tax deductions.
Is it possible to make money online?
2018 is probably the best time for making money online. Though there are no true get-rich-quick schemes, with a passion, patience and strategic planning you can become a successful trader. One of the most efficient ways for comfortable investing is an OctaFX Copytrading