Trading is difficult. Even more so in the forex market because of its volatility and around-the-clock trading – but that doesn’t mean that it is impossible. More traders are emerging successful and stepping out to share their experiences during their first year because it is an important period for establishing the basic fundamentals. There is also room for exploring different trading styles to find one that best suits you, which has the potential to either make or break your trading career.
In this article, we will share 5 tips with you that can help you survive that first critical year as a new forex trader. By taking your own learning seriously, you can make sure you will be one in the elite group of traders who come out as successful after the first year of their trading journey.
1. Have enough capital
Having sufficient funds to sustain your trading and survive temporary drawdowns is important. As we have mentioned in the past, it is key to practice good risk management when trading forex. Margin requirements must be met and stop-loss levels must be abided by. All of this requires at least some capital.
With less capital, holding different positions limits the number of trades that you can make. This also means not capitalizing on all opportunities, which might result in a lower-than-expected performance.
The question of how much capital you need to start trading is a complicated one without any straightforward answers. The reason for that is obviously that everyone’s trading performance will differ, and so will their goals and needs in terms of returns.
The only general rule here is that the more you can put aside for trading, the better your starting point will be. If you can also afford to keep some savings on the side, it can be beneficial for you since it means that you don’t have to start making money from trading right away. Removing stress is an important part of becoming a successful forex trader!
2. Build a detailed trading plan
Before any serious trading is done, you should have already done some research about different trading styles. This is essential for formulating a plan – outlining a few approaches which you think are easy to keep up with and that you are comfortable with, along with realistic goals and risk management strategies.
Of course, plans are never 100% solid and should only serve as a guide. After trying out various approaches, it is important to record what works and what doesn’t. Also make sure you keep a detailed trading journal where you record all your trades, and points to take away from each of them.
Change the plan as you learn more about the different trading methods you’ve tried, and find out what works best for you. To survive as a trader over the long-term, finding out your own niche helps to more quickly establish the consistent profitability you need.
3. Manage expectations
The general consensus about trading today is that a lot of money can be earned in a short amount of time. This is true, but only when done carefully and correctly. Many traders come into trading with very unrealistic expectations because of success stories from others that they’ve read online or in a magazine, but they fail to realize that those are a small minority. The hard reality is that the vast majority of traders end up losing before they start reaping profits.
4. Learn from previous mistakes
As mentioned, keep a record of all trades ever made regardless of profit or loss. If there are more losses than profits then you might be doing something wrong, and it would be better to pause and take a step back. Analyze your trades in detail, and find out what went wrong.
Reviewing and reflecting is as important as the actual trading itself because it sets you up for growth in the future. Analyzing past mistakes also allows you to learn from them and not make the same mistake in the future.
For example, being an effective trader is all about getting the most out of each trade. If a trade was exited prematurely, losses are made in terms of potential profits. Analyzing a previous trade that was exited prematurely thus allows for better understanding and observations of the signs that were missed.
5. Don’t give up
It is normal to sustain losses at the beginning of trading. It’s part of the experience, as some would say – getting your fingers burnt. Because then you feel the realness of it all as compared to doing trading on demo accounts.
Losses are part of trading. Don’t get disheartened by them, because the market can be rather unpredictable despite previously proven trends. Having multiple losses doesn’t mean that you should abandon your trading system and stop keeping up with your watchlist, because it might just be a bad time in the market – you have to always be watching and be ready to enter the market again at the right time.
To be a successful forex trader, you must have grit. It is an arduous journey, but it is definitely worth it at the end of the day when profits are reaped. It is also an exciting opportunity for self-discovery and a test of your character. Good luck on your forex trading journey!