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Many people think education and license are essential in any business. However, trading is a business where knowledge and license do not mean a lot of fortune. Testing, analysis, and patience are the most important things in trading.
A forex trader, aka a currency trader or a foreign exchange trader, is an individual that indulges in buying/sell of currencies on a forex exchange platform. Financial institutions or banks appoint forex traders to help them manage cross-country transactions to ensure profitability. Apart from this professional appointment, some forex traders have opted for exchanging currency as a bread-earning occupation.
I suggest you read our article to learn more about is forex trading is profitable!
How to Become a Forex Trader?
To become a forex trader, you must read books on currency exchange, technical analysis, and fundamental analysis. In the next step, you need to practice on a demo account (virtual account), learn to make decisions, and create bad and good trading positions. Finally, when you see profit gains in the demo account, open a forex trading account, make the first deposit, and become a forex trader.
To become a forex trader for me, there are two main paths. One is to become a remote trader from home either to manage your funds or to manage prop trading company money. The other path is to find a trader job, get a certification, and start working as an employee.
Please see my video where I described the whole process:
How long does it take to learn forex?
The average trader needs around five years to learn forex trading and develop a personal trading strategy. However, in a few months, traders can quickly discover the trading process, basic technical analysis skills, and fundamental analysis. The trading strategy improvement, market behavior knowledge, and experience can be built only over a long time.
How do I become a currency trader?
- Step 1: Start reading trading books.
Please see our advice in our article Can Forex Trading be Self-Taught? Please try to read the most important trading book, “Technical Analysis” by John Murphy.
This book shows that forex trading can be self-taught; traders can read books and practice trading like any other skill. Trading is not brain surgery but based on analysis, testing, and patience.
- Step 2: Try to understand risk.
Anybody with little money and patience may turn into a Forex trader. It would help if you had time and skill to turn into a profitable or successful trader. As a new forex trader, you should focus on restricting losses and spotting trade setups with positive risks. In the face of the ease of getting into the Forex trade, there are some measures you should take. Hurried entry into Forex business may lead to losses very quickly. Let’s find out how to become a Forex trader. Read everything about an absolute and maximum drawdown in the portfolio.
Then try to read our article Can You Make a Living Trading Forex and see the risk table.
- Step 3: Choose a broker and open an account with a reputable broker.
- Step 4: Practice trading using a demo account.
- Step 5: Deposit money and start trading with a low level of risk (risk less than 1% per trade).
- Apply to become a prop trading company money manager to be funded.
How much trading capital do you need?
Forex traders would not require significant capital because they can trade on margin. An ordinary Forex broker needs a minimum of $100 to activate an account to start trading. To become a Forex trader, the golden rule is to start with at least $500 to activate the mini account. However, this number may sound slightly higher for beginners, but that will let you work like a safeguard in loss cases. If you are not looking for risk, the enormous amount will ensure you are not forced to exit the trade.
Why $500 is the minimum amount? If you trade micro-lots and risk $5 per position (50 pips on one micro-lot position size), it is a 1% risk for your portfolio. 1%-2% risk is the maximum risk for new traders (and good traders as well).
What qualifications do you need to be a forex trader?
You do not need qualifications to manage your own money. Incorporate finance; you need a license (learn about FINRA certificate). So, do you need a license to trade forex – No, if you trade your own money or PAMM or MAMM accounts. If you work in the company as a trader – some companies will ask you to have a license.
You will not need a certification if you work from home as a remote trader and manage your own or prop trading company money. However, you must have finance certifications if you want to find a job and work in that company as a trader or analyst.
See my video about forex trading certifications:
So when you ask yourself, How do I become a forex trader – start trading and read trading books. To manage your money, you do not need qualifications.
Using the Demo Account
The Forex trade demo account works on fictitious money. It is connected to the live market. Trades may be located in actual time and can represent what could be a genuine loss. Before you spend on his line, you will require some basic practices. A demo account can give you this trading practice without any pressure of being right all the time.
How to practice forex trading with fictitious money?
Before practicing, you must learn a few Forex trading strategies and advice from trading books. As a Forex trader, you may require to develop trading ideas. However, in the beginning, it may help you get some directions from professionals, and reading as much as possible is essential. Forex trading may be very discouraging in the initial days. That’s why you may need guidance and advice from an expert Forex trader.
Starting the actual trade
To become a forex trader, you must open a forex trading account at a regulated forex broker. After practicing on a demo account and reading forex books, you need to deposit at least $1000 and start trading. However, if you have the experience, you can find a job in some trading prop company and start professionally trading.
There are various ways and methods to become a forex trader.
The first step remains to be choosing a particular way through which you can trade currency. Primarily, there are three ways to trade currencies stated below.
- On an exchange governed by the Commodity Futures Trading Commission
- On an exchange managed by the U.S. Securities and Exchange Commission (SEC)
- On the counter market (unregulated, off-exchange market)
For trading currencies, an individual needs to have a brokerage trading account.
If you already have a U.S. stock broking account, you might have the privilege to trade forex on the same. While in some cases, you may have to fill out an online currency-trading application.
You may have to deposit a certain amount in your forex account for trading in forex, but it varies from broker to broker. The more deposit you keep in your account, the more flexibility you will get regarding the broker’s risk assessment.
After opening the account, you can trade your preferred currencies, but note that they are traded in pairs. It works on the formula of price rise in one currency leading to downgrading in another.
As a beginner, you are advised to trade only in popular currencies like the U.S. dollar or British pound (GBP), not to face liquidity challenges. As a beginner, you should trade forex on listed and regulated exchanges to avoid consequences on your new journey.
Before you start Forex trading and earn money in Forex trade, you should be capable of profitable trade in your demo trading. The track record of profitable earnings should be a couple of weeks, a minimum of three months, though a period of six months is the best.
Look if you are on the right track.
After practice of a few months, a little training, some education about Forex trade, and becoming a consistently profitable trader, it is time to enter the world of live Forex trading. You will find that it is a little bit different than the demo trading. However, if you continue to like the practice you did to become a profitable trader in your demo account trading, you will find success in Forex trading.
Things to Be Aware of as a Forex Trader
Forex traders can get excited and overwhelmed with the hefty profits in currency trades, but it’s not all rosy. If you can win a big trade with a small amount, you can also lose a significant amount when faced with downward consequences and trading situations. Just like your unlimited profits, you fail, too.
Forex trading comes with complications and complexities, one of which is a lack of uniformity in placing and trading quotes. As an equity trader, you buy a stock in your local currency as it’s listed on your country’s stock market; here, you do not have to worry about the currency converter. But when you are a forex trader, the trading is done in currency pairs, as discussed above. Some trades are quoted against the American dollar, while some are against the Japanese yen. The lack of standardization and regulations makes it difficult for traders to ease and simplify trading forex.
As a forex trader, you must know the fraud spanning your hard-earned money when trading currencies. Anyone can take advantage of your greed if you opt for a regulated forex exchange or an over-the-counter market. Thus, you must avoid getting into ‘Get Rich Schemes.’ There is nothing in this world that you can get without working for it. So, invest your brain when you invest your money in the forex market.
As a beginner, you may be worried about losing your money in the forex market, but you can get a smooth time understanding the entire process with practice forex trading accounts.
Using such a practice account, you can experience trading currencies without spending your money. Go for it when you finally feel confident enough to trade in the real market. It’s a boon for individuals wanting to dive into this field without facing severe consequences. All the best!
How to be a professional forex trader?
If you have funds above $200 000, you can start living as a professional trader. Then you can quit your job and live from your trades’ profit. This is my personal opinion.
Trading cannot always be profitable. No financial markets, including the forex market, are sure to be shot accurately. But as they say, try and try, and you will win. Here winning means being a little more accurate forex trader than you already are.
What is an Accurate forex trader?
An accurate forex trader implies a trader’s possibility to have as high as the possible trading ratio as the number of correct predictions to the total number of input trades when the risk-reward relationship is immutable. Humans tend to find solutions to their problems, which has been confirmed in forex trading. With the best practices, a forex trader can increase the chances of profit and reduce losses. These tactics are as simple as being aware, disciplined, and prepared for the forex market. Implementing constant awareness in trading can, for sure, lead to better accuracy in forex trading. Traders need to learn to analyze mistakes if they want to improve accuracy.
How can forex traders improve accuracy?
For example, a trader creates a strategy to buy and sell some forex pairs using some rules. The trader risks $10 and tries to reach the $10 target. When the trader tested the strategy, his winning ratio was 49%, for example (risk: reward is 1:1). A trader can create a better model, change rules, and add the rules using a trading history plan or some machine learning algorithm. For example, just one filter (new trading rule, for example, to buy only above EMA200 or SMA10, etc.) can improve accuracy, and now it is 52%. This is a considerable improvement, and now the strategy can be profitable.
Tips on How to Become an Accurate Forex Trader:
1. Take It Easy and Create Low Expectations
Even in ordinary life, things get ruined if you make impulsive decisions. The same thing applies to forex trading. Be straightforward when trading in forex.
The forex market is highly leveraged as much as the typical leverage scenario looks like 50:1 or 100:1. If you have $1 in your forex trading account (it is just a hypothetical example), you will get to trade forex worth $100. That is insane. In some cases, the leverage is as much as 200:1. The profit using leverage is gigantic. Still, it also comes with the downside risk of being wiped out from the forex market within seconds if the trade goes in the opposite direction.
Forex trading is different from stock market trading. In forex trading, after getting done with the questionnaire on trading goals, if you have a debit card and an identification card, you can have margin trading, unlike the stock market, as in the stock market, you need to have real money in your trading account. Thus, it’s easier for more people to trade in the forex market.
Easy access often makes novice traders enter the market hoping they will make easy and quick money. The attraction here can be compared to a lottery ticket people buy as their financial remedy. Most buyers feel they will win the lottery and get rich in a few days. But they forget that only one in a hundred million has the odd chance to win the lottery.
The same thing happens when new traders enter the market. They forget that the forex market is not a lottery; it would require more than a chance. There has to be enough knowledge, skills, and patience to win profitable trades, which doesn’t come by gambling.
Thus, the best practice you can opt for while starting forex trading is to go in easy. It would help if you had a limit on how much you should trade initially. In addition to that, never trade without a stop loss. Stick to your reward-to-risk ratio and how much you can lose in a day. If you abide by your rules and apply your skills, you will eventually earn well. But never trade as if you are gambling – this is the bottom line for being an accurate forex trader.
2. Be Prepared for Your Trade
One has to be prepared for the endeavors that they are aiming for. So, to be an accurate forex trader, you must be fully trained before you begin trading. No one wants to be an average trader. In forex, average trading means being one of the 2/3 forex traders who lose money. Forex traders often lose their capital money, resulting in high debts. Also, intermediate forex traders tend to give up trading within four months. No one wants either of these, correct?
The best way to avoid these consequences is to educate yourself on forex trading and try trading on a practice forex account.
You must read as much as possible, keep yourself updated with the current news, and learn the forex market’s technicalities. You can read financial newspapers, watch educational videos, or go through research papers. You may have to invest time, but that would be the best trade you would take in your life.
As stated above, you can also start to learn trading through a practice forex trading account. Most of the U.S. forex brokerage houses provide these accounts without charging fees. So, could you make the most of it? Take a pen and paper and make a note of your trades and your mistakes. Trade journaling is helpful. It will help you keep track of your trading directions. Your initial trades would not be profitable, but that’s fine, as that is how it is supposed to be when you are learning. And that’s the reason that you should do it on a practice account, so you do not lose real money.
3. Be a Disciplined Trader
The foremost thing to be an accurate forex trader is to be disciplined. You must decide your losing capacity, place stop loss according, and not deviate from it at any cost. Also, do all these things before you start your trade. Even if you think you can gain more profit, don’t trade, as greed is poisonous, and you may end up losing more than what you have won now. Stick to your trading plan, as without a trading plan; trading is just mere gambling. You can’t expect to win if you can’t follow your own rules.
4. Don’t Fall for Scam Traps.
This doesn’t seem as significant as standard practice, but it is crucial. In greed, we tend to do things we won’t do otherwise. There are people out there who take advantage of your greed by selling you “guaranteed results” and “get your money doubled” schemes.
Thus, choose only a credible broker; cheap can cost you a lot more in the case of forex trading. You can also check the credibility or the status of a broker from the National Futures Association (NFA) in the United States. It is a big red flag if your potential broker is not on the record list. Remember, in the end, as much as you educate yourself and as much time you invest in forex trading, the more accurate forex trader you will become with time.
The Forex market offers you the scope to trade round the clock. Additionally, the capital to start trading is significantly low. You can decide how much money you want to trade.
Now, you can learn how to begin trading in the Forex market with these easy tips, and you’re well on the way to having a successful Forex trading business.