I know you must be seeing flashy cars and money forex and crypto traders are flashing everywhere including the Instagram. However, those rich Niggas can never tell you the whole truth about forex trading because they will want you to get involved.
In essence, am not saying that forex business is not lucrative, however, nobody will tell you about the risk involved. Or you are too overwhelmed with the luxurious pictures and videos that makes you fail to ask. In many cases, you will see Youtube adverts from brokers saying they made $200 from $20 dollar just in few days.
Are those things really true or just a mirage? The truth about forex trading is that more than 80% of beginners who invest their money in forex trading loose it. Yes, that is how risky forex trading can be. Even most brokers will warn you about the risk on their website.
So, what does it really take to become a successful forex trader? Or where are all those posting luxurious cars and houses getting their own money? Is forex trading different for different people?
The answer to these questions is that there are few successful traders who have really paid their prize. Meaning that, these people have passed different stages of forex, learnt and relearn, practiced, lost money, tried and tried till the success you are seeing.
Sincerely speaking, forex trading is like every other skill acquisition that takes time and gets better with time. There are different stages one can pass through to become a professional forex trader.
Expected Stages Of Learning In Forex Trading
The professional traders were once a learner and they all passed through these stages. You too can become a professional trader only if you can be patient and persevere.
1. Beginner stage
In this stage, you must have heard and seen beautiful things people do with forex money. Therefore, you are intrigued and excited at the same time. You want to just jump inside the forex market and collect your own junk of the money. In your mind, you are already seeing yourself as a rich dude thinking of properties to buy.
Again, you will be sold many strategies, trading tools, market sentiments and all have you. At that point, you will be overwhelmed trying to learn so many things at same time. Consequently, leading to more confusions. In a single trade, the signals from moving average, Relative Strength Index and Fibonacci may be different. Then, all you have to do is a guess work.
In fact, what you are, at this stage is a mere gambler. Because, you know nothing about risk management, patience, leverage trading and how the market works. The effect is that you will start loosing all your money – Yes, I said all your money.
Consequently, emotions will set in, you will want to put in more money so that you can recover the lost ones. At every point, the market will still win you because you are forcing trades.
Therefore, i always encourage you to start with a demo account as a beginner and trade for years to know how consistent you are with winning before you can put in real money.
Note that almost 80% of traders quit at the beginners stage and go lick their wounds. But, few will persevere to enter the intermediate stage.
2. Intermediate stage
At this stage, you have lost and lost and went back to start all over. At that time, you will no longer be moved by the so many trading tools and indicators, market sentiments and all that. Meaning, you must have discovered a strategy that works for you most of the time. Also, you have started believing your own analysis and is able to close your ear to all the market noise.
However, will you still be successful at this stage? – not really.
The truth is that you must have learnt how forex works but you still have one big obstacle on your way, which is risk management.
Most beginners at this stage may not be able to fund big amount of money. So, with $200 or $500 account, they will want to grow the trading account overnight. And also, with the zeal to recover their lost funds and make profit, they tend to take more risk than necessary.
Consequently, any trade that goes against them will definitely blow their account.
Note that most traders remain at this stage throughout their whole life, repeating same thing everyday. Gaining and loosing at same time. They will never break even till they learn risk management and discipline.
3. Professional stage
Funny enough, professional traders do not really need much from the market – 10% gain for a year is enough for them. This is because they have very massive account that any small gain will be significant.
Professional traders have the understanding that it is an investment and not gambling, so they manage their account very well.
It is important to know that professional traders are resolute and calm. They are not those you see posting cash on Youtube and Instagram. Those ones you see showing money are maybe intermediate traders who want to lure you to come and buy their trading course or join their group. However, they will never show you their loosing days.
How to know you are ready to Invest as a Forex trader
With all these stages and transitioning, when will you be ever ready to trade? You are already a forex trader the first time you opened a demo account. But, is it wise to put in your real money at this stage? – No, unless you are a miracle worker.
When is the right time to put real money?
Before you can fund a real account as a forex trader, there are factors which you must deal with first. Also, there are skills you will master in other to be successful. They are;
1. Learn price action
Price action is the basis of every forex trading. Like, can you look the market and tell if its going up or down?
Knowledge of other aspects of trading such as indicators, confluences, correlations, currency strength etc., are also important. But, you can never use any of those tools if you suck with price action. In other words, every other aspect of trading augments price action.
Therefore, if you still cannot look at market structure and predict its direction. If you have not get yourself acquainted with some market patterns such as Double top, Candle formations, Head and shoulder patterns etc., and when they are forming, please never invest your money.
2. Master yourself
It is not just enough to predict what to expect from the market. In fact, predicting the market is the easiest of them all. If you bring a small child to a chart and ask him/her what the market is doing, S/he will tell you its going up or down.
But then, the difference between a good trader and an amateur is emotional management. Two different emotions govern trading; Fear and Greed.
Fear will never allow you to enter a market no matter how clear the price action is. You will always sit and watch trading opportunities pass you by.
Greed on the other hand will make you trade even the untradeable setups because you want to have it all. Fear Of Missing Out (FOMO) is more common with greedy traders. Because they see a candle is looking bullish, they will jump in without trying to know if its just a retracement.
In other to strike a balance between your Greed and Fear factor, you must be disciplined as a trader. Sometimes you will need to sit on your hand, be patient and wait for hours of even days for a pattern to develop. Successful traders have trading journals and rules that must be met before they can buy or sell any currency pair.
This means that if you still have that urge of jumping into every trade, then, you will need to work on your mindset before investing real money into forex trading.
3. Learn risk management
Risk management is an integral part of trading. This is a truth about forex trading that not many people will tell you. Do you know that no trader is correct all the time?
But successful traders capitalize on risk management. They do not need to win trade all the time. With 3:1 risk to reward ratio, you only need to be 3 times correct out of 10 trades to be successful. i.e. all you need is to be correct 30% of your whole trades.
How it works; if you risk 1% to gain 3% (3:1 ration), i.e. you gain 3% of your account for every trade you win. If you win 3/10 of the trades, it becomes 3% x 3 = 9. Then the loss will be 1% x 7 = 7%.
Therefore, if you win 3/10 of your trades, you will be 2% up (9% – 7%).
How To Grow As A Trader
Two traders may start trading same day but one will make faster progress with time. This maybe because of one or two reasons. Therefore, consider these factors if you want to hasten your growth speed in forex trading.
1. Get your self a mentor
Just like in every skill or profession, you will need someone with experience to guide you. If you have to pay to get mentored, do it because you will gain more on the long run. Your mentor will teach you a strategy that has proved to work over time and will guide you to avoid some unnecessary mistakes. However, the problem lies with knowing who is worthy to teach forex since many Dick and Harry are parading themselves as professionals. I would have suggested a mentor for you, but i know you may think i was paid to put it up. So, go to Youtube, watch those guys you like what they are doing and subscribe to their Channel. You will definitely see traders that suits your kind of lifestyle.
2. Practice and practice
Another truth about forex trading is that no mentor will teach you everything. What they will teach you is the basics and their own strategy of trading. It is now left for you to go back, sit down, practice and practice.
One of the best way to practice is by backtesting (on tradingview) any strategy that your mentor taught you and see if the result is consistent. This will boost your confidence to execute trades because you are already convinced that the strategy works.
3. Be disciplined
As I mentioned earlier, there is no way you can grow as a trader if you are not disciplined. Always know that forex trading is meant to be an investment and not gambling.
Therefore, know when to enter the market and when to exit. Also, know when to do nothing, example when there is an upcoming news or when the market is consolidating. If FOMO (Fear OF Missing Out) moves you, you will hardly grow in forex trading.
4. Test the depth of water with one leg
Finally, never invest all your money in forex trading nor go and borrow money to start trading. Or worse, quit your job because you feel you have seen a self sustainable business and you now feel like a Boss.
Always start small and grow with time. You will get to that stage and you will know when you do. It is stupidity and foolishness if you do otherwise.
Forex trading takes a lot of dedication, practice, learning and patience to be successful. If you are looking for a get-rich-quick stuff, better stay off from forex and go try Lotto. It is a skill and you must bend down to learn before investing your real money.
Otherwise, learn other Ways You Can Earn Money Online without much risk.