How to Succeed in Forex. Step by Step Guide
The appearance of access to trading on the Forex currency market in our country, which has practically no traditions of exchange trading, was accepted ambiguously: by someone - with unbridled enthusiasm, by someone - with unhealthy suspicion.
How tried their luck on Forex, poured their savings into a several trillion turnover for free international currency market, but someone has earned the same capital.
And hundreds and thousands of traders are stubbornly pursuing their dream, having made currency trading a successful hobby or profession. This is the path to success we'll talk about - not forgetting the infamous 95/5 statistics.
On Desire, Intention and Willingness
As you know, 95% of small participants in Forex trading are doomed to failure. But this figure will not be so scary if we discard those who come here "just to try." Indeed, traditional advertising is an invitation to make a quick buck, often accompanied by a call to quit boring, low-paying jobs.
But let's not forget the laws of our universe: if something arrives somewhere, then the same amount will certainly decrease elsewhere. In other words, a potential trader should think about what would happen if everyone believed the advertisement and earnestly engaged in currency speculation - and only after realizing the pattern of the 95/5 statistics, move from the desire to "make a million" to the intention to do so.
What is the difference between intention and desire?
Understanding the effort required. Trading is not a way to easy money, but a skill based on good theoretical preparation and psychological practice. And do not expect to acquire the necessary knowledge and skills in a couple of weeks: you will have to combine “boring low-paid work” with training for more than one month, since only after serious preparation can you claim serious success. At the moment, not many forex dealers offer a good training program for beginner traders, but there are still such, for example, Alfa Forex and A-Markets.
Analytics as a Basis
Currency speculation is often compared to gambling, because both on the stock exchange and in the casino you can hit a big jackpot at one time - which is completely excluded in the painstaking work of an employee and even in the routine affairs of an entrepreneur. But, unlike casinos, analytics plays an important role in trading, and there are two types of analysis - fundamental and technical.
Analysis of Fundamental Factors
The term "fundamental analysis" is used to denote methods for predicting the exchange value of an asset. With regard to the foreign exchange market, this is actually a study and comparison of those factors that drive exchange rates, namely, the main macroeconomic indicators of the state of a particular national economy:
Money supply balance in the domestic market;
Discount rate of the central bank;
Indicators of economic growth (unemployment rate, GDP, etc.)
Inflation rate, inflation expectations;
The general economic course of the current government;
Potential and direction of possible political changes, etc.
Fundamental analysis is an assessment of the market situation, taking into account financial, credit, economic and political factors, the definition of global trends and their drivers. The success of such a study depends on the depth of knowledge of the laws of financial markets, including Forex, understanding the big picture, the ability to select significant events from the news flow and competently compare them.
Such knowledge does not come overnight, and if you have never been drawn to learn the intricacies of the economy, you should think about your readiness to work as a trader. But problems with logic and mathematics can become an obstacle in mastering the second pillar of successful trading - technical analysis.
Technical Analysis
Technical analysis is based on the postulate of the subordination of price movement to trends: similar circumstances produce similar behavior of market participants, which makes it possible to transfer the price change patterns identified during the study of historical data to the current period.
The basis for conducting TA is price charts ("charts"), which are usually used in combination with additional tools - special charts and geometric shapes superimposed on top of charts or formed next to them.
This form of analysis originated in the 18th-19th centuries, and today many methods have been developed for predicting price movements. Not only successful speculators, but also mathematicians had a hand in their creation.
Today, trading platforms are automated, and technical analysis tools are available for use by every Forex trader, however, any such tool needs to be configured, and without a deep understanding of its meaning and purpose, one should not expect results.
Unlike fundamental, technical analysis does not consider the causes of price changes, but only trends in dynamics, so the path to real success lies through the development of both types of analytical activities. And only in this case, Forex trading can be spoken of as a professional activity, and not as a search for happiness in a casino.
About Risk Protection
Exchange trading has always been a high-risk activity, but in the Forex market the risks are especially high, due to the fact that we are talking about margin trading.
For your information : the exit of thousands of ordinary traders to the world currency market is provided by the credit services of brokers, who, in fact, provide their clients with a loan secured. At the same time, the amount received exceeds the amount of collateral (margin) by 1-2 orders of magnitude (before the adoption of the so-called “Forex law” in Russia, some brokers offered leverage up to 1:1000, since 2016 there has been a limit of up to 1 :100).
At the same time, the trader has the opportunity to minimize risks, and the most important of them is the use of proven strategies and strict adherence to the basic rules of trading.
Stop Orders: Protection Against Fear and Greed
The terms "Stop Loss" and "Take Profit" should enter the trader's subconscious even before he opens his first trade, because it is stop orders that are effective protection against the loss of a deposit. The first of them (stop loss) provides for limiting losses, automatically closing the deal when a pre-calculated allowable loss is reached; the second (take profit) is profit fixation (the desire to get as much as possible often ends in the loss of earnings).
Stop order rules are an important part of a trading strategy. And the next step on the road to success is precisely the choice of strategy.
Trading Starts with a Strategy
These words mean a set of rules and techniques that ensure the profitability of trading due to its algorithmization and reducing the psychological burden when making decisions.
It is important to understand that there are no strategies with 100% success in Forex, but the one that is able to consistently provide a positive balance between profitable and unprofitable transactions is called profitable.
In the most general sense, all tactics are divided into long-term (a position remains open for an average of 3-5 days), day trading (intraday) and scalping (modern technical capabilities allow transactions to be made within fractions of a second).
There is a lot of literature on this issue today, and there is also the opportunity to test various methods on historical quotes, which is highly recommended for every successful trader.
When choosing a trading system, it is necessary to take into account not only the most suitable mode of operation, but also the parameters of one's own psyche (scalping, for example, is the most stressful strategy that requires instant decisions).
Psychological Preparation for a Trader
Even having deeply studied the theory of trading and having selected reliable trading tactics, a trader cannot count on guaranteed success without the psychological readiness to accurately enter the market and exit it on time. Underestimating the importance of this factor cost many beginners a deposit.
What, the start is postponed again? Yes. A strong recommendation for those who want to get into the lucky 5% is to read books on the psychology of trading and get acquainted with the exercises that some experienced traders offer. The emotional load during the implementation of currency speculation is very high, and often a trader who knew exactly what and how to do spoils everything himself - and then he himself cannot understand how it happened.
Thus, Forex trading is a mentally and emotionally complex activity and has nothing to do with gambling, as success is more dependent not on chance, but on the level of training of the trader. Another point on the way to success, which also depends on the trader, is the right choice of a brokerage service provider.
Broker is Your #1 Partner
Choosing a broker is another task that requires specific knowledge, in this case, understanding the essence of brokerage services and knowledge of the legal basis for their provision, without which it is simply impossible to compare the conditions offered by numerous operators and assess the reliability of a particular intermediary.
The solution of this problem should be approached as responsibly as possible, because the trading conditions (the size of the spread and swap, the mechanism for executing orders, the stability of the platform, etc.) determine the success of the implementation of the strategy, and the very ability to withdraw invested and earned funds depends on the reliability and reputation of the dealer. .
Summing up
Contrary to advertising statements, Forex trading is a risky and very difficult job, which, like any other activity, requires a special talent. But with a serious intention, you can become a professional in this matter. Three simple tips to keep in mind:
Do not leave a demo account until you fully understand that live trading is very different from demo trading;
Do not leave the market at the first failure on a real account: success does not come immediately and only to those who are persistent enough;
Analyze and learn, because the market is changeable, and updating of knowledge is necessary.
And the last thing: the depressing statistics of 95/5 is just the ratio of amateurs and professionals. Become a professional - and you will be doomed to success!
