If you want to become a successful forex trader, then you must treat your trading as a business. You may be based at home, and you may have found it easy to start up as a trader, but you're still going to face a challenge if you want to return a profit.
Like any successful business, you will need to follow strategies, gain experience and plan carefully. If you treat forex trading as a hobby, then your chances of becoming profitable are minimized.
Why you need to apply business discipline to your forex trading
- You will be able to understand your liabilities and limits, especially if you intend to indulge in medium-to-high-risk trading.
- You can plan to have realistic expectations and a schedule by which you can schedule your growth as a trader
- You will be able to equip yourself with genuine strategies for use in a volatile market
- You will plan and oversee all details of costs, tactics and contingency plans if things go awry
- You will discard emotion, as this is your business wealth, and not your personal wealth
You need to have a workable structure for your forex trading, and a clear understanding of what it is that you are trying to achieve. Discipline helps you to boost your results, and to add stability to your trading ventures. You will also establish a proper pace for your trading, and by setting goals that are measurable and realistic, you will have a much better chance of achieving them.
Managing your performance
Any attitude you adopt towards trading needs to be organized. This will enhance your capacity to be able to achieve the goals you have set for yourself. When you start out as a new forex trader, you will be lacking in experience and knowledge. If you adopt an unstructured approach to forex trading, then you will only lose money. Manage your performance and you are less likely to make mistakes in future.
Start with a demo account. This will enable you to test your trading strategy without risking any of your actual capital. You will learn to build up a trading plan, and you will gain an understanding of what works, and what doesn't. It is only consistent performances that create a profitable career.
You are more likely to make losses than profits when starting out. Focus on the losses and work out what went wrong. If you establish a definite pattern, you will learn what you need to do to avoid future errors.
Keep track of your finances
Successful businesses establish a budget and then stick to it. A bad gambler is one who chases their losses. A good gambler is one who knows when to quit.
As a forex trader you need to control your spending. Doing so will save you from experiencing heavy losses when you make any trade that qualifies as high risk. Never trade with unrealistic expectations – you will not become a billionaire, or even a millionaire overnight. Even if you make a series of successful trade then don't believe that you are 'on a roll'. Establish your budget and stick to it. All it takes is one bad trade made while over-stretching yourself to bring financial disaster.
Every trader would love to make big profits from small trades, but only a very small number of traders achieve this. If you trade small, then you the profits you make will also be small. This is not a call to only trade big amounts. A small, manageable series of profits will provide a steady income stream. Highly expensive trades come with a high level of risk, and should only be made if you are entirely comfortable with the prospect of losing your entire investment.
Sometimes it is tough to keep in touch with money going in, and money going out, but you must. Are you spending too much on worthless trades, fees and commission? Work out where your money is going and set yourself guidelines. Establish a loss-limit and commit to never exceeding it.
Keep precise records, and analyze profits and investments. From your very first trade, check and update your finances after every transaction.
Develop yourself as a trader
We never stop learning. Life is one long journey where you constantly acquire knowledge, experience and new skills. Trading is an activity that is only suitable for those with high levels of self-discipline. To become a better trader, you need to learn, and you need to learn from those with more experience and expertise that yourself.
Becoming a new forex trader can be a frustrating business. The learning curve is steep and typically comes with a stream of setbacks and frustrations. It's estimated that the majority of new forex traders quit after their first two months of trading.
If you take the effort to improve your skills as a trader, then your confidence in your trading abilities will rise. You will have more chance of becoming successful, and more chance of achieving your goals. You may excel in a certain discipline – use this to your advantage when you are making trades. Additionally, the better trader you become, the more profits you will make.
It's important that you stick to your trading plan. There's often the temptation to abandon a plan – even when it has been successful – once rates begin to behave in a volatile fashion and emotions begin to kick in. Self-discipline is important to prevent you from falling foul of this.
Think of your trading career as you would an athletic one. Your goals cannot be achieved without dedication. Imagine that everything that you do is geared towards your personal development plan as a trader.
Trading in foreign exchanges is pointless if there is no meaning behind what you are aiming to achieve. Apply business discipline, and you will gain more from your trading career. It will enable you to correct your mistakes, and to move forwards as a successful forex trader.