How to Become a Professional Forex Trader
If you have been trading, you probably asked yourself this question… How to Become a Professional Forex Trader? Well, it can take years of commitment, supported by well-defined strategies that show consistent profitability, to become a professional trader. However, the returns are worth the effort as it produces a steady stream of high income along with a lifestyle that people can only dream about. A large number of opportunities wait for the expert market players, as they get plenty of offers to work for hedge funds or international banks; they can also choose to work independently from home-office. Professional forex traders are considered students of global economic and central bank policy, because they know that market trends can change direction very quickly with a change in the direction of central banks around the world. Therefore, a trader should consider three key factors to pursue his career as a professional forex trader; getting the right education, finding the right strategy, and having enough capital to trade.
How to Become a Professional Forex Trader – Get the Education Right
To be a pro in the forex market, one must be familiar with the forex terms, tools and strategies, and the working mechanism of the market. He should focus on equipping himself with the market knowledge by attending webinars and reading forex magazines. These elements not only enable him to get acquainted with the rapidly changing trends, but also allow him to be aware of the latest developments. Most of all, he must read forex charts and news in order to observe the market movements and latest trends.
It is very important to get the right education. However, in addition to the above mentioned tools, he must also identify the right trading attitude that is suitable for him. For example, there are day traders, swing traders, and the position traders.
Day Traders – These are market participants that trade during the day and usually avoid keeping anything once the session is closed. They usually trade with high-volume.
Swing Traders – As for swing traders, they sometimes hold positions for a few hours or even days to gain out of longer time-frames. Unlike day traders, they seek profits from an entry into the market and hope that change in the direction will help their open positions.
Position Traders – Position traders have a unique market perception as compared to swing and day trader. They go for longer term trading plans and their strategies are positioned on a span of days, weeks, months and even years. This is the reason why they prefer long term fundamental opportunities instead of technical formations.
Therefore, a combination of adopting the right trading attitude and getting the education right is a key to be a successful pro forex trader.
How to Become a Professional Forex Trader – Finding the Right Strategy
A trader must not forget that if he fails to employ the right strategy, his trade would end in disaster. Choosing the right strategy is another important element that has to be considered while pursuing a path of being a pro. Different forex strategies are available in the market, including daily Fibonacci pivot trading, Trading Candlestick Patterns with Moving Averages, Price Action Trading, Breakout/Support and Resistance/Supply, Demand, Volume Trading and more. However, while employing the strategies, be careful while trading off news stories, as news are discounted by markets very quickly and are not easy to trade. Also, don’t chase your tail; once you find a reliable currency system, stick with it and don’t change it. Use objective criteria to trade the signals and avoid subjective theories, such as Elliot wave or cycles, because your emotions might get in the way.
How to Become a Professional Forex Trader – What’s Your Business Capital?
When you trade in the forex market, it is important to be aware of the fact that it is a highly volatile market, so invest what you can afford to lose. For example, if your entire savings consist of retirement funds, it is better to think before you invest high capital, because high volatility means high risk. Despite employing all the best tools, one cannot avoid the risk of losses.
An investor or a trader shouldn’t risk more than 1 percent of his funds, and then consider leveraging as it increases the returns. Using leverage allows a trader to participate in the otherwise high capital requirement scenario as long as he complies with the 1% rule. They can increase their return as the trading account grows.
You only need a small edge to make a living, but for that to happen, your account should be large enough to offer monetary benefits you can live off off.
Before you turn professional, some logic needs to be in place. Having unrealistic expectation is not going to help. A good trader can probably generate a return on investment of 30% per year. If you have a 30% return per year with a $100,000 trading capital, then your expected profit for the year is $30,000. Is that enough for you and your family? If you need to have $300,000 per year to survive, then logically, your trading capital has to be $1 million. Most trader overlook this simple math and turn pro only to find that they are not generating enough profit to cover expenses. Remember this…Warren Buffett has an average of 25% per year returns and George Soros does 23% per year.
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