When it comes to trading forex for a living, I can assure you that it is the dream of all new traders. However the fact is only a small percentage of these traders are going to make it through their first 3 months of trading. In fact, more than 80% of new traders who enter this field lost all their money within a short period of time.
So does that make trading forex for a living an impossible task?
It is a definite NO, I myself is a currency trader who is making enough money from the market to replace my day job. I also have friends who quit their job because they are able to generate more money from trading than their day job.
However this is not an easy journey for all of us, it took us a minimum of 8 to 9 months of learning and practicing to achieve what we are achieving today. The problem with most new traders who are introduced into this field is they thought that currency trading is as simple as pushing a button and money will roll in. Some of them even resort to buying robots thinking that it will help them to make thousands of dollars every month.
Let’s be realistic, if the robot is able to generate you thousands of dollars every month, do you think that the creator will sell it to you at a low price of $97? Personally I feel that the only way for you to be able to trade profitably is through hard work and constant learning.
Below are some key factors you have to take note if you want to trade forex for a living
1) Thirst For Education: This is one thing that most new traders lack of (I believe you are not because you are already putting in effort to read my blog), most new traders do not spend time to learn the rope before they start to trade. This is because they tend to think that trading is very simple and do not require much learning. If it is that easy and anyone can trade profitably without putting in time and effort to learn, everyone will already become a full time trader today.
The reason why I emphasize on the area of education is because you need to have a strong understanding of how to read the market in order to succeed in this field. You need to know when the market is going to reverse, when is it going to move even higher or lower and these knowledge can only be learned from people who have made it in this field. That is why constant learning by reading books or attending courses is very important.
2) Practice On Demo: The next mistake committed by new traders is their eagerness to go LIVE. Most people go immediately to live trading without doing any demo and nearly all of them lost all their hard earn money within months or even weeks. Trading is somehow similar to doing maths, it requires practice to become perfect. When you are demo trading, you get to try out certain strategies that you have learned and then check if it is suitable for you. You can also fine tune them to better improve their winning percentage and this should be all done with your demo account.
Once you have formulated a good trading plan, you can then move on to trade live with your real money.
3) Stick To Your Plan: Another problem faced by most new traders is their ability to stick to their plan. It is extremely important for you to trade according to the plan that you have formulated when you are in demo trading. As you already have tried the strategy out and knew the winning percentage, all you have to do is to trade according to it.
Most new traders are very eager for action and they tend to enter a trade even when there is no setup that is tradable and this is one of the main reason why their account got wiped out. For me, if there is no setup that is stated in my trading plan, I can go without a trade for days because no trade is better than losing trade.
4) Good Money Management: Even if you have done the above 3 factors, you still need this last one to make you a profitable trader. Being able to produce profit is important but being able to keep the profit is even more important. There is no point in winning trades in a row and then lost it all in one trade.
Therefore you need to exercise good money management in order to stay profitable. Personally I always keep my stop loss for each trade to within 3% of my account and the number of lots to enter will then depends on the amount of stop loss for each trade. With this management, I am able to lose 33 times in a row to wipe out my account. Since I know the winning percentage of my trading strategy, there is no way I will be losing 33 times in a row and therefore I will be able to produce consistent profit every month.
As my trading account grows, the number of trades I can enter also increases and this in turn will increase my monthly income.
I can’t emphasize more on the above 4 factors that make me a profitable trader today and I hope that you will also be able to become one as well. Read through the above and then put in time and effort to practice and you will see your trading account increases over time.
If you think that there is any factors that I miss out in this post, do feel free to give your comment below as I hope that this blog can be a community where all traders share their thoughts.
In addition, if you think that this post can be useful to anyone you love, please help to spread the word by clicking on the retweet button above. All the best and enjoy your World Cup 2010 this month. (I am going to catch a match now)