It is possible to make a living trading forex, but it is by no means easy – and more fail than succeed. So what does it take to be one of the fortunate ones who can make a living trading forex?
There is no short answer to that. There are some absolute fundamentals that you will need to know, some trading skills you will need to possess, and some fortune along the way as well. Now even if you follow the basic principles, and know everything you feel you need to, not everyone will succeed in making a living trading forex.
This is a path that is littered with failed dreams.
For those of you that are fortunate enough to make a living trading forex, it will be a stressful endeavour, but one which is equally enjoyable for those with the passion for trading. To that end, we have put together 10 of the absolute basic requirements that all those who intend to trade forex professionally will need.
10 essential requirements to make a living trading forex
These 10 requirements are the basics you will need to trade forex for a living, but there are other intangibles to take into consideration.
Becoming a good forex trader takes a lot of hard work, dedication, and discipline. If you are not sure about something, don’t trade it.
1. Get some education.
There are many books, online courses, and other resources available to help you learn about forex trading. Find a good one that fits your learning style and stick with it. You need to understand the basics before you can trade successfully.
2. Have financial goals that you can work towards daily.
If you are considering making a living trading forex, you will need to have goals, and working these out back to a daily profit target could be one of the best ways to build incrementally. If you are able to hit this goal consistently over a period of time, say 6 months, then you may be ready to try to make a go of it as a forex trading professional.
3.Consider how you will need to trade in differing market conditions.
Some strategies work well in trending markets, but fail miserably in choppy or range bound markets. You need to have a good understanding of different market conditions and how they impact your chosen strategy in order to make a decent living trading forex.
4. Have an edge.
This could be a technical indicator that you are particularly good at interpreting, or it could be fundamental analysis that allows you to make better trading decisions, or a particular instrument that you have very detailed knowledge on that gives you some alpha on the market. Having an edge gives you an advantage over other traders and can help you to make consistent profits, turning your trading account from forex beginner, to forex pro.
5. Be disciplined.
Trading is a very emotional game, and if you let your emotions take over, you will almost certainly lose money. You need to have strict rules in place for when you enter and exit trades, and you need to stick to them no matter what. It is also important to have a risk management strategy in place, so that you know how much money you are willing to lose on any given trade.
6. Be patient.
Many new traders try to make too many trades and they end up taking too much risk. You need to be patient and wait for the right setups to come along. Once you have found a setup that you like, stick with it and don’t force trades just for the sake of it.
7. Manage your risk.
This ties in with being disciplined and having a risk management strategy. You need to make sure that you are not risking too much money on any one trade, as this could wipe out your account if things go against you. A good rule of thumb is to risk no more than 2% of your account on any given trade.
8. Have a cast iron trading plan.
This should outline your trading strategy, your entry and exit criteria, your risk management strategy, and anything else that is relevant to your trading. Having a plan will help you to stay disciplined and focused when trading, and will increase your chances of success.
9. Keep a trading journal.
This is a great way to track your progress as a trader and to identify areas where you need to improve. Every time you make a trade, make a note of it in your journal along with the reasons for entering and exiting the trade. Over time, you will be able to look back at your journal and see what is working well and what isn’t.
10. Get some help.
If you are serious about becoming a professional forex trader, then you may want to consider getting some help from an experienced trader or a trading coach or community. They will be able to provide you with guidance and support, and can help you to avoid making costly mistakes. It is also handy to have connections to likeminded individuals when times are tough, as at some times they will be, and can otherwise be awful lonely.
Making a living from forex trading is not easy, but it is possible. If you are willing to put in the hard work and dedication, then you can be successful. Just remember to start off slowly, get some help when you need it, and always stick to your trading plan.