Forex trading is a competent task, and it requires skills, knowledge and power to learn quickly. Moreover, the drive to observe the market and earn during challenging times is icing on the cake for traders. Unfortunately, many people trade in the foreign exchange market, but several are still not aware of the accomplishment of forex trade. Either they are in oblivion or do not have the fire required to obtain the optimum quality of mastering the art to trade in currencies.
Myriad myths and misconceptions are floating around in the financial markets that long-term investment would be more fruitful. Some say short-term investments are superior, and the rest believe the intermediate period reap bigger rewards. They all are partly wrong and right.
When talking about nuanced approaches, one has to be vigilant because opportunities of buying and selling currency pairs can strike anytime, unannounced.
Lack of planning in forex trade
Every trader thinks of being successful in the market, but not many grab it. There are several reasons, and the biggest is lack of planning. Forex is one market where going without a plan is akin to fighting a war without arms and ammunition. One can foresee losses lurking from far behind. So, it is the preparation on paper before going into the live trading market that helps forex investors sustain for a longer time.
A trader may achieve a small goal or an instant one through a fluke, but it cannot guarantee success for a longer period. Thus, a market player must have a concrete strategy in place for making wealth.
Decide trading purpose
If you ask most people why they are trading or what’s the reason, they will go blank. This is because they are either forced into financial trading by their friends, colleagues and relatives. Sometimes, they get compelled out of competence seeing their pals doing well and earning well. But that’s not the purpose of forex trade. Getting driven by money is one thing, but foreign exchange should also interest them.
It is for traders to decide whether they want to take up trading full-time or part-time, but they must put the best of their focus and sincerity for whatever reason or time they devote to it. That’s not just the way to nourish interest, but to feel respect for what you do.
After acknowledging forex trade as a thing that gives happiness in trading, the purpose is found. It is the satisfaction that sprouts from exchanging different currencies. Moreover, it supplements additional earnings to people, which adds to their income and bank balance. Thus, once the objective gets established, planning or strategising are mere byproducts of it for a trader.
Setting trading goals in forex trade
Once the objective is clear, it is time to set some goals to understand forex trade better. Again, it is advisable to take tiny steps and to go slow. The profits and risks can be understood clearly through the approach. In addition, beginner traders would save a lot of effort and time in excessive brainstorming.
Hence, for accomplishing bigger goals, it is necessary to bifurcate them into several small ones. Moreover, it aids in learning new tricks during trading in tiny trading. The time frame can be made considering the bigger duration. If the ultimate goal is two years, small targets can be set and achieved for a month.
So, the final target or goal can be easily achieved through a series of small goals. However, that requires the application of astute planning in place. It can be acquired through brokers like 101investing, Brokereo and others. They offer it through their experts, news alerts and tools.
Any trader who is capable of pulling off the desired monthly goals can be termed an accomplished forex trader. The process helps in bolstering the confidence of individual investors over a period. The natural optimism witnesses a growth toward the market.
Furthermore, some traders can be seen making long-term goals without dividing them into small targets for expanding their horizons. However, their quest for becoming rich quickly hands over a lot of trouble in the forex trade to these traders. Also, they do not make the required effort, which becomes the biggest reason for their failure or non-success.
The greed for success does not let traders stick to their trading plans. Instead, it causes anxiety, which leads to heavy losses. So, it is essential that come what may; a trader should stay put on trading goals. Losing patience causes wrong decision making in forex trades.
Sure shot way of forex trade
It is the short term goals that amass the long-term ones methodically. So, being true to the potential of trading is important for a trader to achieve the target. Also, making realistic goals is important for a market player. He/She must observe the market and see what is available to them for hatching. For example, if there are good volumes in the GP/USD currency pair, scalping in it can reap the rewards.
However, they may be smaller considering the overall target, but the returns on investments go past the target when it continues for a prolonged period. That’s the achievement that sellers and buyers relish.
Risk and reward ratio
While creating a target of fixing a goal, a forex trader needs to know about the risk and reward ratio. Generally, it should not be more than 1:2. It means, for every loss, you should earn twice as much for the compensation. That counts as profit-making for a trader. Moreover, keeping a trading journal is important for acknowledging several trades initiated by a trader.
Also, an investor should not fund more than 10 percent of your total budget in every forex currency pair ideally. So, for example, if you are trading EUR/USD, do not invest beside ten per cent of your account balance. That’s the maximum you must limit yourself to lose.
Thus, that is like covering for losses. Furthermore, one should consider only those trading setups for price action that hold the surety for profit booking in the forex trade. And they should abide by the guidelines.
Learning psychological process in forex trade
Each trader should pass different stages of psychology while trading in the forex market. It is a part of reassuring and assessing the complete knowledge of different forex currencies. The stages can be defined as conscious incompetence, conscious competence, a moment of awakening, unconscious incompetence and unconscious competence.
The moment of awakening
Effective trading is directly connected to the moment of awakening, aka the psychology of a trader. The approach to global markets exhibits that. Once the trader knows why and how the forex market works in favour of herself/himself, that’s the awakening moment. There’s no turning back from there, and profits start to pour in for market players.
Traders have to begin from the basic level that enlists them why they can’t foresee the direction each time. Knowing the limitation helps traders grounded and let them keep a check on the importance of profit booking.
If you as a trader prepare yourself that losing and winning are two sides of the same coin in the forex market, and they are inevitable when you trade, investments will become easier.
For following an established strategy, it is essential to know the necessity of discipline required by the forex market. Sometimes, the understanding does not come from theories but from practising in a live market.
Brokers like ETFinance and Global TradeATF offer practice or demo accounts. Therefore, traders have plenty of time and reasons for trading carefully. Thus, for gains to develop, one needs to watch the forex market and listen to experts.
Unconscious incompetence
It is a stage of psychological trading where users are not aware of their incompetence in the forex trade. It is the initial stage, where a beginner does not know about the knowledge required for trading. Beginners are tempted by making profits quickly, and they find it difficult to control their emotions. Thus, unknowingly make bigger investments sometimes that make them suffer in the forex market.
Unconscious competence
After closing and entering several positions, a trader reaches the stage of subconscious competence, or unconscious competence, which is not deliberate. It comes as our mind works in mysterious ways. It calculates the risk factors automatically and let a trader decide the best course of action. The valuable skill gets developed over a period.
Conscious competence
This is the stage where a trader starts thinking logically and does not run behind winning forex trades. Instead, he/She follows the system and makes every opportunity count through their strategies, patience, observation and investments. The feeling and emotions are kept aside, which helps in reaching the best decision during forex trading.
However, sometimes, emotions may get the better of a trader. Thus, the tinge of discipline is required to bring back the focus toward the market and turn the tables in favour of an investor. After losing some bids, a trader takes lessons and adheres to risk management strategies. Also, he/she tries not to attempt the same mistakes again later on.
Conscious incompetence
This is the diciest stage for a beginner forex trader or anyone, despite knowing the reason and necessity of accumulating financial knowledge in the trading market. Thus, they look for guidance. However, they may get driven away by false information following expenditure on several books, tutorials (available with brokers like HFTrading, PrimeFin and Capixal) and experts’ advice.
Moreover, such traders look for chances to become rich quickly and attempt to get them into trouble because there are zilch shortcuts in forex trades.
Realistic expectations in forex trade
The forex market has the biggest trading volumes compared to other financial instruments worldwide, with over USD 6.6 trillion worth of daily transactions. That’s a huge number. Hence, fluctuations in either direction can be greater. Thus, traders may think of taking risks beyond their capacity.
Hedging is one of the tools that they use, and in the absence of knowledge, they lose more than they can anticipate. So, users should foster mere realistic targets and expectations while trading any currencies.
Being realistic will also mean not to expect to earn 5 times your investment each day. It may happen once or twice in a blue moon, but not every day. So, developing that understanding is crucial before you indulge in the forex trade. Moreover, there’s no guarantee of safety while you trade the volatile market, but it is better to be aware than being sorry.
Patience is the greatest virtue in forex trade
If you can wait and see the right time and patiently see off the bad time, there’s no better way to make profits in the forex market. Wait for your currencies to reach the level you’ve targeted. Remember, there’s always the next opportunity that may gain you benefits. So, be hopeful apart from being mindful while trading forex.
Preserve your capital
In the forex market, more than earning huge returns on your investment, it is crucial to saving your funds from getting drained due to mistakes or issues on your part. Before winning the extra capital, you should first ensure preserving that you already possess in your capacity. You have to be defensive while making every move to chalk out the best idea or strategy.
You cannot make money if you run out of it. So, understanding the importance is mandatory in the forex market, where people risk their funds in hedging.
Conclusion:-
Obtaining optimum accomplishment in forex trade is not a mean feat. It takes years and a lot of effort for investors to realise how to get there. Moreover, it is not a technique that can be force-fed, but an experience that every individual gains by spending many sands of time. Moreover, the psychological aspect, discipline, zeal to learn, preserving the capital, and realistic expectations are some factors that a forex trader needs to know. Also, choosing the right brokers like 101investing, ABinvesting, InvestLite, and PrimeFin can serve the purpose to traders.
