So you’ve dabbled in share market investing, you follow the news and global affairs closely, and you don’t mind a little risk. Soon enough you’re holding an opinion on global currencies and wondering how to profit from it. Welcome to the world of foreign exchange (Forex) trading. But what do you really need to know to succeed?
Making money in forex isn’t as easy as it may look. It’s widely recognised that to be a successful trader in this area, having a firm understanding of the wider financial market isn’t even the bare minimum. You must also have a strategy and be able to analyse and keep informed of global events and political affairs in real time.
Because traders usually make money on the forex market by predicting how pairs of currencies will be valued against each other, you need to have a deeper understanding than most about the health of a particular economy to be able to make money as a speculator.
Keep reading to learn the four best practices that make a successful forex trader.
#1 – Stick to your plan
If you’ve done your research and have a solid strategy in place for trading, make sure you stick to it. Your plan should include when to enter and exit the market based on your research and goals.
Don’t be tempted to deviate suddenly from your plan if an outcome is not as you expected. But if you do, make sure you evaluate the situation and thoroughly assess the risk-ratio factors first. It takes resilience and discipline to trade and staying level-headed is a challenge, especially in volatile markets.
#2 – Select the right time of day
It’s important for a forex trader to choose a good time to place a trade. You need to be aware of when the market opens and the time zone for the currency you are trading. This ensures you have the most up to date information and values, enabling you to place the right trades at the right time.
#3 – Educate yourself
There’s plenty of resources on forex trading out there, including webinars, podcasts, courses and education hubs on trading platforms, so make sure you get clued up before you start.
Continuing to develop your knowledge is good practice for any trader and it means you’re less likely to get complacent, which will likely have a negative effect on your trading performance.
It’s also imperative to be aware of factors that will likely impact the forex markets. Global and political events such as conflicts, elections and news headlines surrounding large corporations will usually influence the forex market.
#4 – Treat it like a business
To be successful, you must have a business-minded approach. Traders who treat investing as a hobby are less likely to be as profitable with their trades. So, if you’re serious about trading the forex market, commit yourself mentally and manage your investments as you would any other business asset or commodity.