Trading Forex for a living as a retail trader

Trading Forex for a living as a retail trader

The foreign exchange market is the biggest marketplace in these present times, with an approximate $4 Trillion daily turnover and still growing. In this marketplace huge lumps of money in form of electronic currencies are traded between banks and other liquidity providers, and retail traders follow the trend to make profits. However, as a retail trader you make profits only by trading in the direction of the trend via a trader’s account that you open with a broker. In this way of trading you can make a decent living so long you observe the following parameters explained below:

Device an effective trading strategy

A trade strategy basically is your own set of rules that guide you on how to approach the market. This in general determines your approach to the market and includes when to take trade positions, what targets to anticipate for and finally when to exit trades. An effective trading strategy encompasses the bigger picture of your trades and way of trading as a particular trader. While identifying a problem is already half the solution, being able to device a trading in forex is already a half-won battle.

Know the kind of trader you are

The largest percentage of forex traders, about 90% are speculators, also known as short term traders. The other fraction of forex traders is comprised of investors who in this case take long-term position trades. Trading forex for a living will most likely fit the smart short term traders who in this case are distributed in four categories: the scalper, day trader, swing trader and position trader.

The scalper trades the least amount of time ranging from 1 minute to 15 minutes while the day trader trades within a trading session or for the entire day. The swing trader holds position for up to a week or more but does not trade every often. The last category is a position trader. This kind of trader will hold on to a trade from anywhere between a week to a month and sometimes even more.

Device a trading plan

Once you have a trade strategy and you know the kind of trader you are, next is to formulate a trading plan. Basically a trade plan is about how you manage your trades within your strategy. For instance, what percentage of margin exposure works well for you as well as how often you trade and how to manage your profits and losses in order to experience constant growth in your account deposits.

Most Importantly

The three aspects of forex trading mentioned above take time to device, practice and perfect on a demo account before real money is put at stake. You also have to master a proper risk management plan and know your success rate in addition to your return on investment ratio.

The success rate is a contrast of your positive trades to the negative ones and is expressed as a percentage. Your return on investment ratio is about how much you expose to the market against how much you get back. The success rate combined with the return on investment ratio will determine how much of your margin you can expose to trade safely.

Your success rate doesn’t have to be greater than 50% and your return on investment does not have to be so high.

Develop a discipline in yourself to stick to your strategy and trade plan. Discipline and consistence in this case will foster your growth as a Forex trader.

What to observe in your trade strategy and trade plan:

Always calculate your moves ahead of execution time. This safety precaution encourages you to focus on long-term perspective sight of the market as you set trade targets, and is highly practicable on hourly, daily, weekly and even monthly time frames.

Map the scope of your trades on your immediate higher timeframe, probably on an hourly and daily chart, but only enter the market from the lower timeframe signals. This will increase accuracy in your entry points.

Avoid trading most frequently. The more often you trade the more likely you will enter a wrong signal or probably get caught in a pullback.

Trade on low leverage and only expose a maximum of 4% from your margin. All your stop loss allowance should amount to a maximum of four percent of your margin. In case of a negative outcome you can always handle this amount of exposure without investing your emotions. That way you become a professional trader.

Avoid trading news sessions and on days scheduled for major news releases. News drive the price and sometimes the outcome can be so erratic hence highly unpredictable. This only works to add to your risks.

Trade only on high probability setups and concentrate most of your time in studying the market rather than trading. This way you will experience high forex income potential without much struggle.

Avoid getting greedy at the markets as your forex income will only be a percentage of how much margin deposit you have got in your trader account. Instead, focus on profiting on a long term perspective.

Forex trading is a skill that takes time to practice for perfection but once you are good at it you will surely make a sustainable income like any other professional job.

 

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