15 things you should know about trading forex
Most if not all traders gravitate towards trading forex because of the earning potential and the many benefits of becoming a successful forex trader. The majority of them not knowing what they are getting themselves into, so this article is dedicated to highlighting the top 15 things you should know about trading forex online.
To ease the confusion/ uncertainty, let’s do a brief exploration of forex trading.
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What is trading forex?
Forex means foreign exchange which is the buy and selling of currencies as they move up or down with the intention of making a profit. This is done so via a currency trading account which of course is being hosted by one of the best online forex brokers available to a trader.
Once the forex broker account is created, verified, and funded, a trader may begin entering and exiting trades as he or she sees fit.
Which platform is best for Trading forex?
After or upon created the forex trading account, a trader will be required to choose among the best currency trading platforms associated with their Forex broker. Up to the date of writing, the best forex trading platforms are:
Best forex trading platforms
- Metatrader 4 – Most popular
- Metatrader 5 – an upgraded version of metatrader 4
- Tradingview – Mostly used for analyzing charts but is also used for managing trades
For more information about forex trading, or that you wish to access a fully free online forex trading course for beginners, then you may do so via the link provided.
With that said, let’s explore the different things every trader should know about trading forex before starting.
15 things every trader should know about forex trading
The following is a list of expectations every trader should brace themselves for. The purpose of this list is to eliminate any unrealistic expectations new traders are prone to have at the beginning of their journey. Having realistic expectations give room for disappointments and would make it easier to overcome and move on from any setbacks while trading.
1. Trading forex is a journey than a destination.
Most often than not, new traders have the impression that once they’ve become a trader, they’ll become rich overnight. Well as much as how we’d all like that to be true, the sad reality is that is far from the truth. Become a successful forex trader is all about the journey and what you’ve learned over time.
This is what’ll separate you from the rest of the traders that are failing to become profitable.
2. Forex trading is a continuous learning experience
The more you trade, the more you’ll continue to learn and experience new things about forex trading, the forex market, and you as a forex trader. These new experiences will give you insight that’ll make trading forex easier than it was before as you continue to develop and hone your trading skills and/ or strategy.
3. Trading forex forces one to be disciplined.
To be profitable, a trader needs to maintain his or her discipline. Apart from a good strategy, being discipline is the key to becoming a successful forex trader. Additionally, it is important to know that being a discipline is referring to:
- Controlling your emotions
- Knowing when you stop trading
- Not be tempted by low probability trading opportunities
- Not be phased when a trade is seemingly going against you
- Not being emotionally attached to the money you are trading
- Not afraid of loses
PLEASE NOTE: This list is not exhausted
4. Trading forex requires a lot of patience
This is one of the most lacking traits for most traders, hence one of the leading causes of their failure to remain consistent in the long run. A trader should have an abundance of patience as it is vital to wait diligently for the right optimal opportunity to enter a trade.
Entering a trade at the right time and place can play a great role in deciding whether that trade will be profitable or not.
5. Losses are inevitable in trading Forex
Without losers, there can’t be any winners. As such, every trader has to lose a trade at some point in time. In fact, there will be times when a trader is having a losing streak. This is because no trading strategy is correct 100% of the time no what how many filters/indicators that strategy has.
In fact, the more a trader trades is the more losses he’ll incur. For example, a trader loses 2 trades out of every 10. The number of losses will be as followed:
- 10 trades: 2 loses
- 20 trades: 4 loses
- 30 trades: 6 loses
- 50 trades: 10 loses
- 100 trades: 20 loses
6. Learning the concepts and basic knowledge of Forex trading is easy
I speak for the Rhasfx forex trading course which can be accessed via service pages as shown in the picture below when I say the topics and basic principles, even the most advanced concepts can be easily grasped with the right amount of dedication from the trader and a clear and concise explanation from the information source itself.
It is due to this fact that our course was written in such a manner to make trading forex easier to understand.
7. Applying the knowledge learned about trading forex is easy.
Apply the knowledge learned in a forex trading course is easy. For example, the article “Closing your trades manually” advised against closing any open trades manually while explaining the ramifications of doing so. Hence a trader will be inclined to let his exit levels (stop loss & take profit) do the work for him.
To put it bluntly, most of the Do’s and don’ts in forex trading are explicit and straightforward and can be easily applied to your trading journey.
8. The hardest thing about trading forex is being disciplined
Not everyone is mentally fortified to deal with the cognitive requirements that are demanded throughout the journey of being a consistently profitable forex trader.
For example, as mentioned above, forex trading requires a lot of patience, a trader may be too hasty thinking that he’s missing out on all the good moves thus leading to him opening multiple trades that are not aligned with his or her trading strategy.
Doing so can, and most likely will lead to a series of losses, especially due to the fact that he or she would not know how to properly manage the trade(s) in question since they were opened outside the boundaries of his or her trading strategy.
REMINDER: A trading strategy should entail entry and exit reasons, as well as what to expect, what to do when those expectations are met.
9. Over 90% of forex traders failed at Forex trading
- On most if not all Mt4 forex brokers’ websites, the declaration of how many of their clients failed is explicitly stated mostly in the fine writing of the home page. Of all the top forex brokers’ declarations I’ve seen, the lowest is 74% with the highest being a whopping 98%. This is not due to the lack of information or difficulties accessing the necessary tools, nor is it the broker’s doing. This would be counterproductive to what any forex broker wants to achieve.
REMINDER: A forex broker makes money from a trader’s trading activity. So the more a trader trades, the more money the broker will make. Hence it would make sense to provide adequate resources to help with their client’s growth.
The high percentage of failure goes to show how difficult it is to maintain the disciplinary traits required as a trader as mentioned above.
10. Banks can see traders’ stop loss in forex trading
One of the sad truths about trading forex is the fact that banks have a universal advantage that retail traders don’t. This is the ability to see stop losses in the form of liquidity in the market. With this, the banks can and sometimes do, manipulate the market price by increasing their position to push the price in the direction of trader’s stop loss, subsequently, the market reverses shortly afterward in the desired direction.
This is called ‘stop hunt’.
To avoid this, it is important to know the best place to enter and where to put your stop loss, all of which were explained through the Rhasfx forex trading course for beginners.
11. You need a good strategy to be consistently profitable
A good trading strategy can make or break a trading account. As said earlier, no forex trading strategy is going to be correct 100% of the time. However, a trading strategy should give the trader an edge against the market wherein he or she can recognize a profit within a given period.
Video: How to create a forex trading strategy
12. Different currency pairs have a different pip value
Each currency pair has a base and a quote currency. Depending on the quote currency, the pip value of that trading asset follows suit.
For example, currency pairs with USD as the quote currency has the value of a pip of $10.
13. The most valuable thing in trading forex is a profitable strategy
As mentioned in the previous point above, a trading strategy can make or break a trading account. To explain differently, having all the necessary knowledge about forex trading is the starting point of developing a strategy.
This is because a trader needs the information to know the do’s and don’t surrounding forex, what works and what doesn’t, and to answer the ‘why’s, what, when, and how‘ questions that’ll need answering.
To summarize, the end goal of accessing information about forex trading is to discover or create a forex trading strategy. The example below is a good way to highlight how valuable a trading strategy is.
SCENARIO: A complete noob who has no information whatsoever about trading forex has a good strategy due to him being taught the conditions for a buy/sell position by a mentor, colleague or, friend. All that’s left is for him to patiently wait for the conditions to be met and then execute.
14. You can lose more trades than win and still be profitable
A trading strategy does not necessarily need a high winning streak to be considered profitable. What matters is the quality of the trade that is being taken.
Quality > Quantity, hence why it is important to have patience.
Can trader can lose a total of -$100 with 5 bad trades and recover that -$100 plus more with one good trade. eg: +$150
15. Every trader experience bad days/ week or month
It is important to have unbreakable confidence within your trading strategy as this is your weapon and shield against the relentless forex market. This is important because there will be times when that confidence is tested by a series of losses. A trader can have a bad day, week, or month, but with a good trading strategy, he/ she would recover all those losses.
16. Not everyday trading opportunities will be presented
As mentioned, it is quality over quantity, but not everyday quality trading opportunities will be presented. If that was the case, then being patient would not be such a high requirement.