The Key Steps to Becoming a Trader
If you’re looking to develop an additional or passive income stream as the economic climate in the UK becomes increasingly strained, you could do far worse than become a financial market trader.
Of course, some markets and niches are more appealing than others, with forex offering a relevant case in point. For example, an estimated $6.6 trillion is traded on the global forex market every single day, while this entity boasts incredible leverage and significant volatility. This also includes companies using FX hedging strategies, which are dangerous to do and best left to those professionals!
While the forex market may be appealing to many, however, the question that remains is how do you become a successful trader? Here are some steps to help you on your way!
- Manage Your Expectations and Overall Objectives
The financial market as a whole is incredibly diverse, with different assets and investment vehicles available depending on your unique goals and expectations.
For those of you with a long-term investment outlook, for example, you can assume the ownership of blue-chip and dividend stocks with a view to earning incrementally over a specified period.
Conversely, forex is ideal for investors with a short-term outlook and a far greater appetite for risk, particularly if you choose to speculate the stock price movements within the market through a CFD. With this type of investment, you can utilize margin to leverage open positions that are worth considerably more than your deposit amount, as you look to optimize the number of orders placed without ever assuming ownership of the underlying asset.
So-called ‘day trading’ can be particularly lucrative, so long as this suits your philosophy as an investor the objectives that you’re trying to achieve.
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- Don’t Lose More Than You Can Afford to Lose
On a similar note, it’s important to remember that trading margin-based derivatives such as currency can also cause you to lose more than your initial deposit.
This is one of the potential pitfalls with forex trading, especially if you fail to build the necessary knowledge of the market or build the sense of determinism required to recognize the underlying laws that govern price movements on a daily basis.
To negate this, you should look to bridge the often-cavernous gap between theoretical knowledge of the forex market and practical trading experience, and this can be achieved simply by using a demo account.
Available through most online brokers, this enables you to access a simulated marketplace in real-time and hone your strategies without having to put your hard-earned capital at risk.
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- Continue to Learn as You Grow
Once you’ve honed your initial skills, the next step is to start trading for real. We’d recommend that you start with a modest portfolio and set of goals, and ideally you shouldn’t trade more than two currency pairings on a daily basis.
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You can scale your endeavors in line with your profitability over time, of course, and it’s also crucial that you continue to learn by making full use of the resources provided to you by brokerage sites.
These include the full range of available technical indicators and analytical tools, of course, in addition to the live news feed that can be accessed 24/7.
This will ensure that you continue to learn and grow while constantly seeking out new investment opportunities, and this is what distinguishes successful from failed forex traders over an extended period of time.