Learning how to trade Forex is not nearly as difficult as you might think. You may have heard mention that Forex trading can be simple, but not easy. What this simply means is that you can trade Forex profitably using simple strategies. Forex trading is not easy for some because of a number of factors such as impatience, lack of discipline, etc.
If we really break it down and look at it on its most basic level here are the necessary components for successful Forex trading:
A Forex trading plan — running any business without a business plan is like trying to fall upward, it just doesn’t work. Doesn’t it make sense that if you plan to be successful then you increase your chances of becoming successful?
A Forex trading system, strategy, or method — your set of rules for how to trade Forex will be included as an integral part of your Forex trading plan.
A Forex broker — finding a good broker is important. Make certain that you get a broker who offers telephone support as this can be an important backup for your online trading.
Adequate working capital — you’ll need to have adequate working capital in order to be a profitable Forex trader for the long term. Many beginning traders make the mistake of believing that may actually limit their risk by minimally funding their accounts. Your account should be funded based upon the parameters of your Forex trading system, especially your trading systems maximum drawdown.
Risk control — there is no one who exercises sloppy risk control who trades Forex for very long. By exercising good risk control you keep yourself in the game and therefore give yourself many future opportunities to profit.
Money management — the term money management is often times used interchangeably with risk control when in reality they are not necessarily the same thing. When I speak of money management I speak of maximizing your return on your equity. This involves trading an increasing number of contracts as your account equity grows. Ideally, what you want to experience is exponential growth in your account equity.
Patience and discipline — trading becomes challenging when things don’t go as planned. A long string of losing trades can take its mental toll on even the most experienced trader. For this reason it is especially important to have your mental house in order and understand that having losing trades is simply a very natural part of trading Forex.
We just covered some of the basics of how to trade Forex. More importantly, we’ve covered a number of things to help prepare you to trade Forex successfully. Make certain that as you continue on your trading journey that you don’t take any shortcuts and to learn to trade Forex properly to have the best possible trading experience.
