The forex market is a popular choice among traders due to its high liquidity and the fact it is open for 24-hour trading. However, all traders will lose money on some trades, with even the best and most-experienced traders never winning 100% of their trades.
Being a successful forex trader isn’t necessarily defined by a high percentage of winning trades. Even if you win 90% of your trades, if the remaining 10% are losing trades that wipe out large amounts of your capital, you’ll end up in a worse position. These losses may come down to a lack of experience, planning, discipline, or not implementing appropriate risk management tools, such as stop-loss orders.
When it comes to trading forex, traders should not anticipate to win every trade, or to make large profits with every win. Likewise, it should not be considered a ‘get-rich-quick’ scheme – your forex trading strategy should be nurtured and perfected in order to improve your overall performance.
It's vital to take the time to develop a trading strategy and practise this on a demo account, before trading for real. You could practise various strategies, including swing trading or scalping, to work out your preference, then take the time to practise the strategy before risking any capital.
Your forex strategy will also be dependent on the amount of time you can dedicate to trading. If you have a full-time job, day trading might not be the most suitable option for you, as you may struggle to spend enough time monitoring the markets.
Your trading plan should have a measurable and achievable target. This could be a percentage amount that you want to increase your overall capital by each week, or how much you want to increase your account size by in six months. By doing this, it enables you to track your performance and have attainable goals, rather than general assumptions, such as thinking you’ll become vastly wealthy from forex trading in a matter of weeks.
Forex trading doesn’t begin and end with the trade, as you must be able to spend time perfecting your strategy, analysing your previous trades and staying up to date with economic news. Overlooking these additional components will prevent consistent profits and you could underestimate the market volatility. Read more about forex news trading strategies.
Certain dates, for example, when data is released or particular events happen, can make the market more volatile, potentially creating dramatic changes in price. This can lead to a trade being stopped out, and can also impact profits and losses. Staying in tune with macroconomic events and news trading releases is essential for developing an event-driven trading strategy.
Forex trading can be profitable, however, not for all traders and with not all of the time – there are no guarantees. It is dependent on the level of dedication you put in to developing your trading plan, as well as perfecting your strategy. This requires a disciplined trader who has an awareness of the market, and confidence with fundamental and technical analysis.
Assuming that every trade with no preparation, prior research or strategy will be profitable, will place more risk upon an already risky environment. Whenever trading, as well as having a well-versed strategy in place, risk management tools like stop-losses should be implemented to prevent significant losses.
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CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.
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