What it takes to be a Forex Trader

 

 

what it takes to be a forex trader

Trading in Forex markets reached an eye-popping $6.6 trillion per day in April 2019, up from $5.1 trillion three years earlier. Ranked as the largest financial market in the world, its mammoth size, easy accessibility, and high level of liquidity offer opportunity to those willing to step out of their comfort zone and learn new skills.

The definition of a trader, either independent or on behalf of a financial institution, is, in simple terms, someone who engages in the buying and selling of financial assets, such as shares, bonds, commodities, and currencies. This can be through an organised exchange, like the New York Stock Exchange (NYSE), or over-the-counter (OTC) CFDs (contract for differences) through a network of brokers.

If you possess an analytical mind, unyielding resolve, and determination to succeed, you may excel as a trader.

 Determination

Before anything else, to achieve success as a Forex trader, or anything in life, you’ll need determination—and lots of it.

Trading is a never-ending journey, a process that will unearth many obstacles.

Without the will power to overcome these stumbling blocks, trading will be an exasperating endeavour, ending with most throwing in the towel.

Trading Education

An investment in knowledge pays the best interest – Benjamin Franklin

It is essential new traders take the necessary steps to educate themselves. It is a key component.

Sadly, some overlook the basics (and even the intermediate stage) and begin formulating a trading strategy, reasoning that success in the markets is straightforward.

Knowledge

To be a successful Forex trader a solid foundation is needed. It’s akin to learning a new language.

 Basics

To become proficient in any skill, introductory concepts must be understood.

Understanding what the foreign exchange market is and who the main participants are is vital learning in the beginning phase. Other basic concepts are how currency markets compare to other financial markets and their history.

An understanding of the basics provides a stepping stone to progress to more intermediate concepts.

Intermediate

Intermediate traders will begin learning the skills required to function as a trader.

Knowing how to read a currency pair quotation is mandatory learning at this step. Other things that must be acknowledged are the difference between direct and indirect quotes, what base and quote currencies represent, what the bid/ask prices (and spread) signify, what constitutes a pip and what a long and short position means.

Additional areas covered will be the different chart types available as well as the process behind margin and leverage. The latter is exceedingly important to have a thorough understanding of.

Another important theory intermediate traders will likely explore is trading psychology. It cannot be stressed enough how significant this element is. Without it, trading success is practically impossible. A trader’s psychological make-up is ultimately influenced by emotions and pre-determined biases.

In addition to the above, traders will cover the different trading styles available, such as scalping, day trading, swing trading, and position trading. Following this, establishing an overall trading plan may be the next chapter, which will require substantial research.

Included within the trading plan is the development of a trading system (a document detailing the trade setups and associated entry and exit rules), employing either fundamental or technical analysis, or both. For example, a trading system may follow a price-action based approach, with one or two additional technical indicators for confirmation purposes, such as the MACD or Bollinger bands. Also included in the trading plan are risk-management and money-management strategies.

Lastly, in order to become a well-rounded Forex trader at this stage, extensive testing is needed, by way of back tests and forward tests.

It’s recommended to demo trade. This provides the freedom to develop trading systems and experience different market conditions in a risk-free environment. It also allows traders to familiarise themselves with the trading platform’s functions. The debate concerning the length of time a trader should remain on a demo is ongoing. Nevertheless, consistent results for at least 3-6 months is a good rule of thumb to follow before considering live trading.

Advanced

It is at the advanced stage traders begin seeing results from testing. To reach this phase is an incredible achievement.

This is only half the battle, though.

The next step, the real challenge, is switching to a live trading account. Many traders find this a difficult transition.

Trading psychology tends to become an issue at this point. Losses inflict emotional strain, particularly when consecutive losses are encountered. Demo trading often neutralises the emotional challenges traders face when handling real money. How a trader manages emotions during trading can mean the difference between a consistently successful trader and one that struggles to breakeven.

Professional traders trust their analysis, trust their testing, and follow their rules set out in the overall trading plan.

Start Small

When real money enters the equation, traders very often feel the pressure.

Shifting from demo to a live account requires a structured approach.

The fundamental difference between trading a demo account and trading live funds, as touched on above, is emotion.

To make the transition from demo to live easier, start trading with a small live account. Find comfort trading small positions and build from this. For example, some traders may feel $1,000 is a sufficient starting account, risking only $10 each trade (1%). Once comfortable at this level, moving to a $2,000 account is an option, then $4,000, and so on.

The key message in this article is if you’re just beginning your trading career, don’t rush. Educate yourself and work through the obstacles.

Becoming a profitable trader, a successful Forex trader, is possible if you’re willing to put in the hard work and time.

Remember why you started – successful Forex trading is a slow process, but quitting won’t speed things up.

 

Introduction to Forex Trading: A Beginner’s Guide

 

What is Forex Trading? 

Forex trading, also known as foreign exchange trading or currency trading, is the process of buying and selling currencies in the global marketplace. With a daily trading volume exceeding  $6 trillion, the forex market is the largest and most liquid financial market in the world. 

Unlike stock markets, forex operates 24 hours a day, five days a week, allowing traders to react to lobal economic events in real time. Whether you're an individual trader or a financial institution, forex offers opportunities to profit from currency price fluctuations. 

How Does Forex Trading Work?

Forex trading involves exchanging one currency for another at an agreed-upon price. Currencies are traded in pairs, such as EUR/USD (Euro/US Dollar)  or GBP/JPY (British Pound/Japanese Yen). The first currency in the pair is the base currency, while the second is the quote currency. 

The goal is simple: buy a currency when its value is expected to rise and sell when it’s expected to fall. For example, if you believe the Euro will strengthen against the US Dollar, you would buy EUR/USD. If the exchange rate increases, you make a profit. 

Key Forex Trading Terms

- Pip (Percentage in Point): The smallest price movement in forex (e.g., 0.0001 for most pairs). 

- Spread: The difference between the bid (sell) and ask (buy) price. 

- Leverage : Borrowed capital to increase trading positions (e.g., 1:100 leverage means trading $100,000 with $1,000). 

- Margin: The collateral required to open a leveraged position. 

- Lot Size: Standardized trading units (Standard Lot = 100,000 units, Mini Lot = 10,000, Micro Lot = 1,000). 

Why Trade Forex?

✅ High Liquidity – Easy to enter and exit trades due to massive trading volume. 

✅ 24/5 Market – Trade anytime, day or night, across different time zones. 

✅ Leverage Opportunities – Amplify profits (but beware of increased risk). 

✅ Low Transaction Costs – Most brokers charge only the spread, with no commissions. 

✅ Diverse Trading Options – Trade major, minor, and exotic currency pairs. 

 How to Start Forex Trading

1. Learn the Basics – Understand market trends, economic indicators, and trading strategies. 

2. Choose a Reliable Broker – Look for regulated brokers with tight spreads and good reviews. 

3. Open a Demo Account– Practice risk-free with virtual money before trading live. 

4. Develop a Trading Plan – Set goals, risk management rules, and stick to your strategy. 

5. Start Trading – Begin with small positions and gradually increase as you gain experience. 

 Risks of Forex Trading 

While forex trading can be profitable, it also carries risks: 

⚠️ High Volatility – Prices can change rapidly due to economic news. 

⚠️ Leverage Risks – Can magnify losses just as much as profits. 

⚠️ Market Uncertainty – Geopolitical events can cause unexpected price swings. 

 

 Final Thoughts

Forex trading offers exciting opportunities for those willing to learn and manage risks effectively. By starting with a solid education, practicing on a demo account, and applying disciplined strategies, beginners can navigate the forex market successfully. 

Ready to dive into forex trading? Open a demo account today and start your journey in the world’s largest financial market! 

 

Trade Balance: How to Use It in Forex

 

This article is devoted to trade balance, its influence on the national currency, and to using it for Forex trading.

What is Trade Balance?

Trade Balance, or International Trade, is a macroeconomic index that demonstrates the difference between the added up prices of all exported goods and added up prices of all goods imported in the country over a certain period. In other words, this is the difference between export and import volumes in monetary terms. Trade balance is one of the key indicators of competitiveness of goods and services produced in the country.

Trade Balance = Export - Import

Depending on which index is bigger, Trade Balance can be positive or negative:

• Trade surplus appears when export exceeds import.
• Trade deficit means that import exceeds export.

Countries present their Trade Balance monthly. It accounts for seasons and has several categories:

• Consumer goods
• Food
• Raw materials and Industrial supplies
• Autos
• Capital goods
• Other merchandise.

As a rule, for Forex trading you need the overall balance without specific details. You can find changes in the Trade Balance on the Economic Calendar.

How does Trade Balance influence the national currency?

Trade Balance has a direct influence on the exchange rate of the national currency. Current dynamics of the import-export ratio that it demonstrates has a direct connection with both local and foreign currencies. The country has to use international currency reserves paying for import and, on the contrary, its trade partners form demand for the national currency to pay for the goods they buy

A country suffering a trade deficit (where import exceeds export) needs access to lots of foreign currency to cover up for import expenses. Falling demand for the national currency alongside growing demand for foreign money has a negative influence on the local money. A decrease in export volumes might lead to an increase in sack leaves in industry and growth of unemployment, which will also make national currency cost less.

Trading surplus, on the contrary, has a good influence on the national currency. A country that exports more goods than it imports will enjoy stable demand for its currency from international trade partners. Increased demand for exported goods leads to the expansion of production, which in turn, means new workplaces and stimulates consumer spending. As a result, the exchange rate of the national currency grows.

 

Using Trade Balance in Forex

You can use Trade Balance for playing in Forex as any other important economic index of a country. See below two trading options.

Long-term trading

This is an approach for investors that requires a large capital and long investment time. Such trading uses fundamental analysis that evaluates changes in Trade Balance alongside other important economic indices: CB rates, GDP, unemployment rate, inflation indices, industrial production, etc.

Positive dynamics (growth of surplus) will confirm good perspectives of the national currency. If other fundamental indices agree, the growth of surplus will increase chances of the currency for growth an heat up interest towards it. Buying the currency, investors will form an uptrend.

Negative dynamics (trade deficit), on the contrary, warns of a possible decrease in the rate of the national currency. If other indices are also negative, an increase in the deficit makes a decline in the currency exchange rate even more probable, and investors will start selling to buy more promising ones. As a result, the market will form a downtrend.

 

Short-term trade

This is the easiest and most accessible way of using the index in Forex. It is based on the short-term influence of publisher Trade Balance on the rate of the currency. In other words, this is about trading news, as they say. Unexpected growth of surplus can cause temporary growth of the currency, and an increase of deficit can provoke falling. This impulse can be caught in trading.

For such trading, you will need to analyze the price chart and decide where and how to make a trade after the news emerges. Use tech analysis here as it will show the nearest strong support and resistance levels, price patterns, and other instruments you can use.

 

Bottom line

Trade Balance is an important macroeconomic indicator that represents the export against import ratio of the country. Publication of this index can influence the national currency a lot.

Trade Balance can be used for long-term trading (alongside other indicators) and short-term trading on news.

GBP/USD drops to fresh one-month low, eyes 200-day SMA around mid-1.1900s

 7 February 2023, 15:48 

 

• GBP/USD turns lower for the fourth successive day and drops to a fresh one-month low.
• Hawkish Fed expectations, a softer risk tone underpins the USD and exerts some pressure.
• Traders look forward to Fed Chair Jerome Powell’s speech for some meaningful impetus.

The GBP/USD pair attracts fresh sellers following an intraday uptick to the 1.2055 area and turns lower for the fourth successive day on Tuesday. Spot prices drop to a fresh one-month low heading into the North American session, with bears now eyeing to challenge a technically significant 200-day SMA near mid-1.1900s.

The US Dollar reverses an intraday dip and holds steady near a one-month peak touched on Monday, which, in turn, is seen exerting downward pressure on the GBP/USD pair. The upbeat US monthly jobs data (NFP) released last week fueled speculations that the Federal Reserve (Fed) will stick to its hawkish stance. This, in turn, remains supportive of a modest intraday uptick in the US Treasury bond yields and acts as a tailwind for the greenback.

In contrast, the Bank of England last week signalled that it was close to pausing the current rate-hiking cycle. In fact, the UK central bank removed the phrase that they would "respond forcefully, as necessary". Furthermore, BoE Governor Andrew Bailey said that inflation will fall more rapidly during the second half of 2023. This, in turn, is seen weighing on the British Pound and contributing to the offered tone surrounding the GBP/USD pair.

Apart from this, the prevalent cautious market mood - amid looming recession risks - further benefits the greenback's relative safe-haven status against its British counterpart. Tuesday's intraday slide could also be attributed to some technical selling below the 1.2000 psychological mark. This, in turn, supports prospects for an extension of the depreciating move, though traders might wait for Fed Chair Jerome Powell's speech for a fresh impetus.

Investors will closely scrutinize Powell's comments on inflation and monetary policy for clues about the Fed's future rate-hike path. This, in turn, will play a key role in influencing the near-term USD price dynamics and produce some meaningful trading opportunities around the GBP/USD pair in the absence of any relevant market-moving economic releases.

EUR/USD Price Analysis: Decline could pick up pace below 1.0770

 7 February 2023, 15:31 

 

• EUR/USD adds to the ongoing bearish move and drops below 1.0700.
• Extra decline appears in the pipeline below the 1.0770 region.

EUR/USD remains well on the defensive and drops to new lows in the sub-1.0700 zone on Tuesday.

The pair has recently broken below the 3-month support line near 1.0770, and this now allows for the downtrend to gather extra impulse in the near term. Against that, the next interim support comes at the 55-day SMA at 1.0662, while the breach of this region could open the door to a deeper retracement to the 2023 low at 1.0481 (January 6).

In the longer run, the constructive view remains unchanged while above the 200-day SMA, today at 1.0319.

EUR/USD daily chart

 

8 qualities of a successful trader

 

Many traders suppose that a profitable strategy will certainly lead them to success. However, they forget that the main part of a trade is a person. Why people who use the same strategy come to different results? Everything depends on their behavior and attitude. We gathered the most useful qualities of successful traders.

1. Be confident. Your strategy can be super profitable. However, if you are not sure in your actions, you will definitely lose. Follow your tactics no matter what. Do not change your targets when it seems that the trade is not profitable. If you are sure in your trading system, nothing can disturb you. Remember that confidence comes from constant practice.

2. Be calm. The movement of the market cannot be predicted with 100% accuracy. You should be prepared for any scenario. Otherwise, panic will lead you to wrong decisions. Every successful trader knows what to do if the market goes against him/her. Be aware of all possible movements of the price and stay calm.

3. It may seem stupid but a lot of traders, especially novices, forget about this simple rule: be yourself! Trade reflects trader’s personality. Every trader has his/her own trading goals. As a result, his/her behavior in the market pursues those goals. If you follow someone’s trading strategy without understanding it, you are supposed to lose. Focus on your personal aims, decide how much risk you can take and keep learning.

4. An additional advice to the previous statement: be independent. Media influences our opinions and decisions a lot. However, while trading you should learn to disregard this noise and stick to your own judgment. To avoid external influence, develop your own experience: watch how the market reacts to news releases and events and track which technical patterns really work. These observations will give you the ability to analyze the market and make your own conclusions.

 

5. Be simple. Do not mix independence with ego. This problem relates mostly to novices. After the first profitable trade, they become sure that they already are gurus and know how to trade. However, such perception will lead to losses. You need to realize that you won’t be able to change the market’s direction. If you see that the price moves not in the direction you supposed, and the new trend is confirmed by unshakable evidence, do not hesitate to change your trade idea, so not let your losses run.

6. Be curious. Successful traders always improve their skills; they never stop studying. The easiest way to improve your trading skills is to analyze your previous trades. Moreover, read more books written by successful traders and learn new features of the technical analysis.

7. Be accurate. As we said in the previous advice, you can improve your skills by analyzing your previous trades. To do it, make notes. Write down your actions, profits, and losses. It will help you avoid mistakes in the future.

8. Be optimistic. Only with an optimistic attitude, you can become a successful trader. A trade is not possible without losses. If you overreact to your negative profit, it will bring insecurity to your trade. Take your losses into consideration only as a good lesson but do not focus on them.

To learn more about trading 

 

Common mistakes of Forex traders

 

“Only fools learn from their mistakes, the wise man learns from the mistakes of others.” Have you ever heard this saying?

We have gathered the most common mistakes that traders make. Avoid your own mistakes, learn from the faults of others!

1. "Fail to plan and you plan to fail"

Everyone knows that it is quite difficult to do something without planning. We will tell you even more: it is impossible to trade without a plan.

A trading plan is a set of rules that consists of your trading strategy and money management strategy. A plan will help you determine when to enter a trade, how to exit an unsuccessful trade, time to reach your target, the amount of money to risk. Without this knowledge, you will definitely lose.

2. Not having a Stop Loss

Even if you are 100% sure of your profit targets, you should better set a Stop Loss. The Forex market is highly volatile, and urgent news can lead to the turn of the trade. In January 2015, the Swiss National Bank suddenly abandoned the cap on the franc’s value against the euro, and EUR/CHF fell by 30%. This event took everyone by surprise. Many traders who didn’t have Stop Loss orders in place suffered great losses. If you do not have a Stop Loss, you may just miss the moment of the turn that will lead to a disaster.

3. Adding to an unprofitable trade

Sometimes traders are so sure in their trading targets that they are blind to the reality. Imagine that you opened a buy order, but the market moved down. You, however, are so sure that you made the right thing that you increase the size of your position in hope that the price will soon reverse up. In a situation like you just multiply losses. If you have an open position, you lose the ability to make unbiased judgments and your actions become chaotic. As a result, never add to a losing trade.

A similar thing happens when a trader increases Stop Loss during an unprofitable trade so that the trade doesn’t close with a loss. Stick to your initial decision. Otherwise, your loss may become bigger. If it was a wrong decision, analyze what went wrong after the trade closed, learn from this trade and use this knowledge to make a better trade next time.

4. Lack of risk management

Traders who do not manage their risks, risk losing everything. Traders can’t allow themselves to think only about profits. You should always count how much money you risk losing per trade and per day. If you keep your potential losses limited, you will be able to stay in the market for a long time and thus have many more opportunities to earn. Stick to the rule: 1% risk per trade. Nothing should distract you from this rule.

 

5. Ignoring news releases

Every trader knows that certain events and data releases affect the Forex market. If the actual economic indicators differ from the forecast levels, currency pairs become very volatile. As a result, all traders, even those who choose not to trade on news, have to take into account the news. Ignoring the news is a serious mistake that can be easily avoided if you plan your trades and consult the economic calendar.

6. Correlated pairs

Traders often try to take multiple day trades, but many of them don’t take into account currency correlations. It may seem you have good chances to earn money on several pairs but be careful: if you see a similar trade setup in multiple pairs, it’s likely that they are correlated. So it means you can win or lose on all of them at the same time. For example, USD/CHF and USD/JPY have a significant direct correlation: when the first one goes up, the second one will likely strengthen as well. So, when you buy both pairs at the same time you double your risk.

7. Trying to avenge yourself

Losses are hard for everyone, especially newbies, so they try to have a revenge on the market. Usually, revenge trades are 2-3 times bigger than a previous losing trade. As a result, they lose even more. Losses are inevitable. Focus your energy not on the revenge trading but on the analyzing of the unsuccessful trade and improve it in the future.

8. Lacking education

The lack of the education leads to the trading blindness and losses. If you want to have profitable trades, you should always improve your skills. If your goal is to be a successful trader, read educational books, learn new indicators and practice new strategies.

To make a conclusion, you will definitely make different mistakes while trading. There is one more saying: if you are not making mistakes then you are not doing anything. However, if you avoid the common mistakes mentioned in this article, your trading will become successful faster.