To become a trader, you need to be able to do three things:
- Understand the markets
- Have a consistent approach to trading
- Commit time every day to learning, practising and living it
There are no shortcuts. Training yourself takes long-term commitment, but becoming a trader is an eventuality, not a possibility. Never discount the tips provided by industry professionals as these are valuable pearls of wisdom.
Trading is about dealing with probabilities, so you need to consider this as building your chances of success rather than pure luck.
It's always sensible to bet on surer things, so look to make lots of small trades rather than one big trade, which could wipe out all your capital if that one trade goes against you.
It's also essential that you have some money to trade with. You won't be able to become a trader if you have no money, and even if you can afford it, it is good practice to only risk as much as you can afford to lose without any undue hardship.
Just remember that the value of your bet should never exceed your ability to pay for it. It means that betting more than 1% of your net worth is not advisable, but then again, neither is trading at all unless your account balance exceeds this 1%.
A number one rule about becoming a trader has always been the same: don't go into debt over it!
Many people make friends and family aware of their bookmaker status and end up borrowing from them at horrendous interest rates, which they may or may not be able to repay.
Another rule for trading is only to trade what you can afford to lose and never think that your winnings are going towards some intelligent investment in the future - they aren't!
You must understand that all of your trades have the same expected value, so it doesn't matter if you made £100 on one trade or 100 trades at 1 point each - in both cases, your profit was £1 per point, which makes every single bet an even one from a financial perspective.
As with any job in life, you can't expect to go straight in at the highest level; you need to train yourself first to become good enough at something before it becomes your profession.
To this end, it's recommended starting off trading simulated money (also known as paper trading) until you can make consistent profits after following strict rules for entry, exit and money management.
It would help if you also learned about chart patterns, candlestick formations, technical criteria and other trading terms to understand what the market is showing you.
It will help you read charts more effectively and offer an insight into how to put yourself in a position where the odds are stacked in your favour.
Once you have mastered paper trading, it's time to trade with real money after having followed your strict rules for entry, exit and money management without fail for at least two weeks continuously.
If anything goes wrong during that period, then the chances are that whatever caused the hiccup will happen again because it has not been fixed or removed, making this trial-and-error method extremely important.
It’s recommended having just three currency pairs on your radar each day:
- one that looks strong,
- one that looks weak and
- another that looks like it could go either way.
You must always think long-term rather than short-term because trading to make 1% every day is challenging and extremely risky.
These are the kinds of trades where you make 20% or more on if they come off, which means hiding your light under a bushel doesn't make sense because you will be consistently making money week-in, week-out.
Once you have become profitable over one year (not just taking profits home but building up your bankroll too), then it's time to take the next step by doing more of the same with more prominent positions and more trades each week - but always within your rules!
You never know when an opportunity might present itself, so it's best to be ready for any eventuality.
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