Have you ever wanted to learn how to make money trading forex? Forex trading can be very profitable, with many traders living comfortably day trading. But like all things in life, it won’t be handed to you on plate. Forex trading is tricky, high risk and new traders can easily lose money.
So I’ve put together this post with my tips on making money from forex and how to begin your journey in trading success!
Forex isn’t a Get Rich Quick Scheme
While the endless advertisements and sales pages may try and convince you that forex is an easy way to make money, the reality is that 90% of retail traders end up losing money. Those trying to get rich quick, are more likely to lose money. They’ll risk too much money, using too much leverage and trade with emotion.
So if you go into forex trading understanding that at the beginning things will be slow and will require weeks and months of practice to succeed.
Starting out with a practice account
If you’re new to forex trading then make sure you start trading with a practice account. Most brokers offer free demo accounts – they work just like real accounts, and use the same price feeds and trading software. The only difference is that none of your trades are real. Instead, everything is simulated. This way you can practice making trades without risking any real money.
Once you’re able to make money using a demo account, then you can move onto using a real trading account.
You can sign up for a free demo trading account with eToro (my top pick for beginners) and use it to test out some of the tips and tricks below.
Developing a trading strategy
The key to making money with forex is to learn and stick to a simple forex strategy. While there are many different strategies, I would recommend most people should start with Price Action. As soon as you learn a strategy such as price action, trading will become much more simple and clear. Instead of just entering trades at random you’ll know exactly when to jump in.
Even with a strategy you can’t expect to win every trade. There may be months where you don’t make a profit and you need to be prepared for this.
Mistakes New Traders Make
I believe that becoming a successful forex trader is about eliminating the things that noob traders do
Trading with too much leverage
Leverage is both an amazing way to profit, and an easy way to lose money. New traders will over leverage their positions. While they may, through blind luck, succeed once or twice, there will be no consistency. All it will take is one bad trade and their account will be wiped out.
Trading with too much capital
If you go into every trade believing you’ll be profitable 100% of the time, you’ll probably lose all your capital. A good trader knows that even with a perfect setup, the market can be irrational and you can lose a trade. Make sure you can whether a storm and you have capital reserved to make multiple trades.
Closing winning trades too early
New traders will get cold feet and close out winning trades as soon as they turn a profit. Yet they will leave losing trades open. What happens is their losses far outweigh their winners. And even if they win 90% of their trades, those 10% losses outweigh all the gains. A proper trading strategy will ensure that you have the confidence to keep your winning trades open and you close out losing trades, even for a loss.
Picking a forex broker
Picking the right forex broker is essential to forex trading success. Here are things to look for when choosing a broker:
Forex is regulated around the world by various bodies. All the top exchanges are fully regulated. You’ll run into trouble if you try and use a broker that isn’t regulated. There’s nothing stopping from closing up shop and running away with your cash. Regulated brokers are insured and audited.
Brokers offer various software platforms for trading. Some of them can be truly terrible. I always recommend signing up with a demo account to make sure the software is usable.
Learning through Copy Trading
One of the best ways to learn forex trading is through Copy Trading. Copy Trading is where you automatically copy the trades of a successful and profitable trader. Whenever they make a trade, your account does too. The best copy trading platform, eToro, is also a social network. You’ll find that many of the best traders, share the reasoning and thought process behind their trades. I have found this to be an invaluable way to learn forex trading.