If you are considering currency trading as a future full or part time career, research will present you with mounds of information and many promises of strategies you should use to make you piles of money. It is important for you to read some of this information, but there are five essential steps you should take to ensure your success in this financial market.
Know Where You Fit Into the Big Picture
As an individual trader in this massive market, you are definitely low in the pecking order. The liquidity that is present in this market is as a result of the transactions undertaken by hedge funds, corporate traders, central banks and large financial institutes. This does not mean that you will not be able to earn money in this market. You have to know who the big players in the market are and you should ensure you know exactly how to trade to play with them.
There is a reason why there is so much information available about this financial market. There is a lot you have to learn and traders who have become profitable in the market are still learning. The most important aspects of the market are your trading strategies, reading forex charts and how to make use of data that is available. Implementing a suitable strategy is the one way to ensure that you make a success of your trading career. Without a suitable strategy, you will be trading on your emotions and this can only lead to disaster. Once you have acquired the core trading skills and all round knowledge of the market, you will have a good foundation to develop a strategy that suits your trading style.
Your asset in this market is money and you should know how to effectively manage it. Many new traders fall into the trap of not managing their funds correctly. You should not consider using all your funds on a single trade or two trades. The recommendation is that you use no more than 2% of your account balance on a single trade. This allows you to enter more trades and in the event the market turns against you, you will still have a balance in your account.
Understand the Market
There are tools and systems available to beginners in the market that will aid you in the identification of suitable times to enter a trade. This is a boon to you, but you should not only make use of automated signals. You should hone your skills so that you are able to read the market without making use of these tools. If you use automation, you should opt for a system that suits your trading plan, style and strategy.
Planning Currency Trading
Developing a suitable plan is a good idea regardless of the market you are working in. When you start currency trading, you should develop a trading plan. This will prevent deviation from what you understand and what you know works for your trading style. Maintaining this plan will ensure that you make consistent profits. If you have a plan and you do not stick to it, you will make losses on your trades. Your plan should include your entry points and exit points and you should not deviate from it.