What Do You Need To Be A Successful Forex Trader?

What Do You Need To Be A Successful Forex Trader Successful Forex traders are a rare breed. Only 5% of retail traders actually make money in the markets consistently.

But consistent profitability is the goal that all retail traders aspire to.

So what do you really need to be a successful Forex trader? This is what i think you need.

1. A Professional Trading Strategy.

Without a professional trading strategy you will really struggle to be consistently profitable. There are many retail trader strategies available to you, but they are all constructed with beliefs about the markets that are incorrect.

The foundations of all good strategies have to be built with a sound understanding of how the markets work. If you have that understanding built into your strategy, then you will have a much greater chance of success. If you build something without a solid foundation it will fail.

2. A Trading Edge.

You will hear this a lot on retail trading websites. An edge is an advantage that traders look for to give them a head start on the competition. Many retail traders believe that they have found, or need to find, something in the market that no one else has previously found, and that will be their trading edge.

Let me just say this for the record. Stop wasting your time trying to find an edge. Your edge is knowing how professional traders trade the markets, and trading the way they trade. If you continue to trade like a retail trader, then you will never find the edge you are looking for, and you will continue to lose money. Knowing how to trade correctly, combined with a professional trading strategy, is the only edge you will ever need.

3. A Professional Approach.

So you know how to trade correctly, you have your professional trading strategy, so you have your trading edge. What you now need to tie it all together is a professional approach.

This can be a problem for some traders. Everyone wants to get into the markets, make their money and get out again. If you have the understanding of the markets needed to be successful, and you have a professional strategy, then its perfectly reasonable to expect to do this on every trade, but its not going to happen on every trade.

Sometimes you have to wait for the correct entry, or the correct exit. You cannot just jump in and out of the market and expect to make money. This is not how professionals trade. A professional trader will wait until the odds of success are firmly weighted in his or her favor, before entering the market. The chances of a successful trade are then much greater.

4. Professional Risk Management.

A professional approach requires you to manage risk. Every time you enter the market you are taking a risk. If that risk is adequately managed, then over time with a good strategy you will make money consistently. Jumping into the markets with 10 lots and no stop loss when you have 5k in your trading account, is not adequately managing risk.

Retail traders are fixated on how much they can make in the markets. Professional traders are fixated on how much they can lose in the markets. If you lose less, you make make more. Just knowing the correct place to put your stop loss will save you money. Whats the point in getting stopped out for 20 pips on every losing trade, when you can get stopped out for 12, or 16. Losing less will make you more.

5. Capital Preservation.

Capital preservation is a major part of risk management. If you have more capital, you can make more money with less risk, if you have less capital you make less money with more risk. So you need to manage risk effectively in order to increase you capital balance over time.

Is it better to make 10% per year on a billion dollar fund with a low risk approach, or better to make 100% per year on a 100k fund with a high risk approach? Its not rocket science is it? This is why the top hedge funds are never short of people willing to invest, because they know how to generate good returns by managing risk, and preserving capital.

I hope this article has given you some insight into how i like to approach the markets.

If you wish to learn how to trade Forex using professional trader strategies, please consider my Forex training and mentoring course.

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Advice On Choosing The Right Forex Broker

Choosing the right Forex broker can be a pretty daunting experience. I have been trading for over 12 years in both stocks and Forex, and i have used many brokers in that period. Some good, some not so good. So how do you choose the right one?

There are 100s of Forex brokers to choose from, and they all want your business. Some brokers will offer you incentives to join them, like introductory bonuses or free commission periods. Some of these deals sound very attractive, but when you read the small print, the offers tend to be very restrictive, and weighted heavily in favor of the broker, so they are generally not really worth signing up for.

Tips for choosing the right Forex broker.

choosing the right Forex brokerThere are some rules that you need to follow when choosing a Forex broker. I am going to list them below, not particularly in order of preference, but you do need to consider them all before choosing the right broker.

Regulation.

You must trade with a regulated Forex broker in my opinion. You don’t want to be giving your money to any old Forex broker, just because he is offering you what seems like a great deal. Regulated brokers are far more trustworthy, and your money is held in client segregated accounts, with reputable banks, and not with the broker. So if your broker got into financial difficulties for any reason, you know your money is protected from any creditors that may come after the broker. I have heard some horror stories of clients losing a lot of money by dealing through unregulated brokers.

Commission Charges.

Commission charges are a major thing to consider when choosing a Forex broker. One of my students has just swapped from Fx Pro to IC Markets, and we have worked out at his current level of trading activity, he will be saving around £86.000 per year in commission charges by swapping to IC Markets.

Spreads.

Spreads are the difference between the buying and selling price of an instrument, and are also a big game changer when it comes to choosing the right Forex broker. Some brokers spreads are good on Euro Dollar, but very poor on all others. For example IG index have a spread of less than a pip on Euro Dollar, but Cable can be up to 3 pips. In their defence they are a spread betting company, that do not charge commission, but even so, 3 pips is a big spread if you are scalping the Forex market.

You need to find a broker with great spreads on all pairs that you intend to trade. Spreads on the major pairs with most brokers are pretty competitive, but i don’t just trade the majors, so i need a broker with great spreads on all the pairs i trade.

Slippage.

slippage in ForexSlippage is the difference between the expected price of a trade, and the price the trade actually executes at. You get slippage with all brokers, sometimes it goes in your favor, but most of the time it goes against you.

Because the market moves so quickly, the price you are quoted for execution, can change in the time it takes you to close or open the trade. Some brokers take advantage of slippage by nicking pips off you, and putting it down to slippage, this is not acceptable, and any brokers that do this are not reputable and should be avoided.

During major news announcements slippage can be more evident with your broker, and you may not get such a good fill during these times, but in normal trading conditions slippage should happen occasionally, and if you do get slipped, it should be no more than a pip with a reputable Forex broker.

Hedging.

Hedging is the ability to open an opposing position in the same pair, without having to close your original position. For example: If you are short Euro Dollar, and price is going up, you may not want to close your short trade, as you feel this could just be a temporary move up. You want to take advantage of this temporary move by going long, so you open a long position, which effectively hedges your short position. By hedging you are making money on the temporary move up, without having to take a loss on your short trade. You can close your long trade when you feel price is going to reverse, and when price comes back down again, your short trade comes back into profit.

Please note: Hedging can be a very dangerous game to play if you do not fully understand what you are doing, but it can also be a useful flexible tool if used correctly.

Most brokers these days offer a hedging facility, but some don’t, so make sure the broker you choose does offer this facility.

True ECN.

ECN stands for electronic communications network. ECN is the technology that allows price makers to send executable streaming prices (bids and offers) to the market, constructing a virtual order book in much the same fashion as a stock exchange would. By trading with a true ECN broker your orders are filled quickly, and at the best possible price. ECN trading offers clients a deep liquidity pool, and tighter spreads than non ECN brokers. Trading with a non ECN broker will lead to more re quotes, and wider spreads.

My Recommended Broker.

I hope that these tips have made the job of choosing the right Forex broker a little easier for you. My recommended Forex broker is IC Markets. They are a fully regulated true ECN broker, with incredibly tight spreads, and great commissions. They also offer hedging facilities to their clients, and scalping is allowed if you trade that way. You can also run expert advisors with IC Markets too if you need that facility.

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How To Stop Losing Money In The Forex Market.

Why do Forex traders lose money? There are many reasons why Forex traders lose money, but in this article i will give you 10 top tips on how to stop losing money in the Forex market.

Knowledge is power.

The most important thing that you need to be a successful Forex trader is knowledge. Knowledge is everything in Forex trading. The more you know about the market the more successful you will become at trading.

There are many websites available online that will give you a certain degree of knowledge to enable you to trade Forex, but 95% of these websites are run by marketing companies, or failed traders, so the knowledge you get from these websites will enable you to trade, but they will not give you the understanding you need to enable you to make money from Forex trading every week.

Its a fact that 95% of Forex traders consistently lose money. And the main reason for this is they do not understand how the market really works, because they have never been educated by a professional Forex trader. I am a professional Forex trader and i can teach you how to trade Forex, and make consistent profits week in week out from trading, but my time is limited so i cannot teach you for free. For more information on my Forex training course please click on the link.

top 10 forex tips

If you do not have the funds available to pay me to teach you how to trade Forex, here are 10 top tips you can use to enable you to cut down on your losses.

1. Don’t trade with more money than you can afford to lose.

Putting pressure on yourself will cause you to make the wrong trading decisions, and trading with more money than you can afford to lose will add to that pressure.

2. Don’t over trade.

Over trading can lead to an emotional roller coaster. If you are taking too many trades you are trading emotionally. Trading should be as mechanical as possible. Emotional trading will lead to big losses.

3. Don’t be greedy.

If you have had a couple of nice trades and banked some pips enjoy them. Don’t think you are on a roll and chase after more pips. This often leads to more risk taking and you end up giving back the pips you made, and some.

4. Don’t revenge trade.

Getting back into a position straight after a losing trade is called revenge trading. When you trade this way you are trading purely on emotion, and you are chasing those lost pips. If you have a losing trade, just sit back and relax, and take some time out to re focus your mind.

5. Don’t over expose yourself to a losing position.

Chasing after a losing position is probably one of the worst things you can do in trading. Adding to a losing trade in the hope that the market will come back will cost you big time. Just admit that you got it wrong and close your trade, and move on.

6. Keep a record of all your trades.

Keeping a record of all your trades may give you some insight into your trading habits. Do you trade better in the morning, or in the evening? What is your average win loss ratio? How many trades are you taking per day? How long are you holding your trades for? Understanding your trading habits will enable you to become a better trader.

7. Trade with a lot size that you are comfortable with.

This is a mistake that a lot of traders can make that will dramatically effect their trading performance. If your lot size is too big, you are anxious when you trade, so you close trades too early, and you stop yourself out of trades too soon. If your lot size is too small the reverse happens. So you need to trade with a lot size that feels comfortable, but not too comfortable.

8. Devise a rules based trading method and have a reason for entering and exiting trades.

You have to have a method. You cannot blindly enter the market in the hope that you will get a winning trade. You have to trade based on a rules based method that has been tested over time and is proven to work.

9. Be patient and wait for the set ups.

When you have your rules based method in place, stick to it. Wait for qualified set ups before entering the market.

10. Don’t rely on indicators to give you trading signals.

The majority of Forex traders rely on indicators to give them trading signals. If trading was that easy everyone would be making fortunes from trading, but that’s not the reality is it. If you want to be successful in Forex trading you have to learn to read price action. Price is the most important thing in trading and it always will be. If you understand price action you will be a much more successful trader.

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