This is one interested and important question that is asked by one of our fellow traders.
What are the 5-10 things one needs to become a professional forex trader?
I believe that most if not all of you who are here reading my blog aims to become a professional forex trader one day. Therefore this post today is one that all of you should read.
What I am writing here is my personal opinion that is formed throughout my years of trading.
Become a professional forex trader is not an easy task and it definitely need some effort from you. Below are what I think is essential for you to become a professional trader.
1) Experience – This is one important factor that contribute to most traders success. If you have been reading my blog, you will understand that I emphasize a lot of trading demo. This is because it will help you to have a better understanding of the currency pair that you are specializing.
With several months of trading experience, you will have a FEEL of the market movement which is very important for any trader. It will help you to have a better entry as well as better exit.
2) Trading Plan – There is no way you can become a professional trader if you do not have a reliable trading plan. What I meant by reliable here is not asking you to find a strategy that wins 100% of the time.
As a trader, you have to understand that losing is part of the game and there is no strategy that can produce 100% winning percentage. As long as you have a strategy that produces 70% winning, you are having a reliable trading plan.
My personal suggestion for you is to focus on one or two trading strategy and then fine tune it until it is able to produce the winning percentage that you are comfortable with. Do note that even if you learn a particular trading strategy from a course, you still have to fine tune it by adjusting the indicator or add some indicators to improve its reliability.
This is because trading is a subjective issue, where you deem as entry may not be the exact entry another trader will take. Therefore you need to fine tune the strategy such that it works for you.
3) Discipline – This is usually where most new traders fail. What’s the point of having a good trading strategy but you do not trade according to it and this is exactly what happens to a new trader.
As a new trader, they tend to rush into trade and this lead them to place their trade even when the setup is not according to their plan.
Another problem that leads new trader to enter unnecessary trade is Revenge trading. Revenge trading usually arises when a trader makes a losing trade and bent on winning it back.
This kind of trading is usually based on emotion which wills most of the time leads to more loss.
If you want to become a professional trader, you must improve in your trading discipline.
4) Risk Management – This is another important factor that all professional traders know. There is nothing more important than protecting your capital so that you can trade another day.
I personally risk about 2 to 3% of my trading capital per trade and this allows me to continue trading even if I met with a losing streak.
Imagine you trade with a risk of 20%, you will be wiped out with 4 to 5 trades and you have to call it quit.
Besides the amount to risk per trade, you also have to improve in your trading risk reward ratio. If you have a high risk reward ratio trading strategy, you will be able to make money even if you lose 50% of the time and this is exactly how professional traders make money.
5) Trade Management – Another way to lower your risk of losing money is through trade management.
Let says that you have enter a LONG trade and you started to see the price moving up making you profit. What you should do as a part of trade management is to shift your stop loss to breakeven so that you are protected even if the market reverses against you later on.
As the price continues to move in your favour, you can then shift your stop loss to lock some profit and this is known as trade management.
The above 5 factors are what I think is the key to becoming a professional forex trader. If you have any other suggestion, do feel free to give your comment below.