Financial markets

Lauren Sawyer

How to Trade Forex Profitably 


When you start to trade in the financial markets with real money, there are several important skills you need to develop if you are to avoid losing all of your Forex trading capital. Through formal training, mentorship programs or tutorials, as well as continuous trading, you will eventually develop and fine tune the skills below. 

1. Money Management 

The first rule that every Forex trader needs to keep in mind is that surviving in the market is paramount. It is a fact of the industry that every trader will have losing trades at some point, but going broke, places you in a position where you can no longer make winning trades. Before you consider any other aspect of the financial markets, you must first ensure that you are in the game and that you have sufficient capital to trade with. 

Many new Forex traders suffer constant losses because they focus only on their trading strategy and nothing else. Although it is vital to have a good trading strategy in place, you will only get ahead as a trader by staying disciplined and having a rational attitude towards foreign exchange trading. 


2. Always Have a Stop Loss in Place 

A stop loss is quite possibly the most powerful weapon that is available to the Forex trader. This feature is of great benefit and lets you predetermine the risk you take on, with each trade, down to the pip, so it is recommended that you always use it. 

Placing a stop loss is a move that really only has advantages and will only be of benefit. It will force you to think about the point where the trade you are entering, needs to be considered as a failure. After opening a particular position in the financial markets, it is very easy to talk yourself into maintaining a trade that is going bad through all manners of irrational excuses. 

However, if you had already set up a stop loss on the trade when opening it (with your thoughts still rational), you will always have a beacon that reminds you how foolish it is to stay in a trade, even after it triggers the stop loss. 

3. Be Realistic 

Without an incredible stroke of luck, it is impossible to have 80% of your trades turning a profit or to make $10,000 in six months, from a trading capital of only $500. It is a scam to think otherwise. If you enter the financial markets having this type of expectation, then you might as well prepare for frustration, disappointment and failure. 

You must always look at things from a realistic perspective, right from the beginning. Determine a percentage of winning trades that is attainable, taking into account your experience and strategy. Decide on the legitimate amount of time you can set aside to trade and learn. With a clear view of the trading conditions and tools available to you, it will be much simpler working towards a more profitable strategy. 

4. Interact with Other Traders 

For new traders in the foreign exchange market, among the most overlooked resources is the input of other transparent traders. Of course, it is also important to read books and tutorials on financial trading, since they provide the solid basis on which to develop and practice your trading strategies. 

While practicing actual trades will quickly get you up to speed, you may be surprised to discover how often fellow Forex traders can be of benefit and provide useful insights on your trading strategies as well as alternative ways to invest on trades. For this reason, becoming a member of a legitimate online trading community or setting up a trading blog, will help you get opinions that will benefit your strategy. 

5. Keep Your Emotions in Check 

This final tip could be possibly the most important of all. As you probably know by now, the financial markets are dynamic, exciting and fun, but it is important to avoid getting carried away. Successful traders view trading as a legitimate business, not as a hobby. 

Your forex trading capital should be used to make business decisions. Some of these decisions will earn you a profit, while others will cost you money. It is that simple. As soon as you start to trade emotionally instead of rationally, the profits will dwindle and the losses will stack up fast.