Every novice but also those who has already been trading Forex market with no success often ask questions like “How to become a good forex trader?”
In this article I would like to give you few tips from my own trading experiences that will help you on your path to learn how to become a good forex trader.
1) You need an Edge
To become a profitable forex trader you need a trading edge. That means you need to find a trading system that is reliable and works well on a consistent basis. If you backtest your chosen trading system and find out that you were winning more than losing over a big series of trades, chances are that you have a winning forex trading system.
Maybe you will need to test more trading strategies until you find the right one for you. Also one strategy may not work for each currency pair. So prepare well before you put real money in line.
2) Attitude & Patience
Once you have your winning trading system you need to have the right attitude. If you asked me many years ago How to become a good forex trader I would not be telling you about patience. But now I can tell you that patience is the key. Patience is one of the biggest forex secrets you need to learn.
You simple need to be patient enough to wait hours, days or weeks (depends on timeframe you trade) for right entry signals to open your position. Once your trading system gives you entry signal you can jump in. But if there is no signal, that means you have to stay out of the market and wait. No second guessing your trading system or jumping in because you are bored and want to make a lot of money fast. And that leads me to next important tip:
3) Realistic expectations
Your expectations can either blow your trading account or they can help you on your way to become a profitable professional forex trader.
When I started my trading career I was expecting to make triple digits profits every year. As a result I have lost all money. Give yourself a realistic profit target and believe me you will be trading much better and with peace of mind.
You simply cannot deposit $500 to your trading account and expect to make a living from it.
4) Money Management
If you want to know how to become a good forex trader you need to manage your trading bankroll properly. That means you simply cannot risk all your capital on a single trade and expect to survive long term on Forex market. There is no such thing as 100% winning strategy. You will experience losing trades very often. Simply accept that as a fact.
I suggest you to risk only 2-3% of your trading capital per trade. This way you will survive losing streaks that are inevitable.
5) Risk Reward Ratio
You do not need to be right every time to become a profitable forex trader. That is a mistake that many novice trader do. They think they need to have a high percentage of winning trades in order to make money.
Do you knoww that you can be a very profitable trader even if more than half of your trades are losers?
It is all about risk reward ratio. If your risk vs. reward ratio is 1:2 you only need 35% of winners to make money.
What is 1:2 risk reward ratio?
For example you risk $10 dollars on your trade. If you close your trade with $20 profit you can have 65 losing trades out of 100 trades and you still will be profitable.
How To Become a Good Forex Trader?
To become a good trader is easier than you think. All you need is to have a good profitable trading strategy, have realistic expectations, master patience and your emotions, manage your bankroll properly and use a positive risk reward ratio.