ACTUAL FOREX TRADING
BECOME A PROFITABLE FOREX TRADER
How to Become a Forex Trader: A Step-by-Step Guide
So, you want to become a trader? Forex has caught your attention? I have been a Forex trader for years. I am in a perfect position to teach you the best steps to become an independent Forex trader.
"Forex trading can be very rewarding - it can provide a significant income and offer a flexible lifestyle where you can work from home. However, Forex trading takes work. It will take time, commitment, investment, and self-discipline. I know as I've done it"
Becoming a Forex Trader: Things to Consider
There are several things to consider before seriously pursuing becoming a Forex trader. These include:
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A Willingness to Learn - The first thing you'll need is a willingness to learn. The learning curve will be steep. It would be best if you were willing to learn from others, some of whom will be younger than you. You must be willing to take notes, ask questions, and take study seriously.
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Strong Emotional Discipline - Self-control and discipline are essential for trading. We all have bad days, sometimes procrastinate, and lack motivation - this is normal. However, trading may not be for you if you have a history of lacking emotional discipline. Traders strive to be emotionless in their decisions. People who tend to find gambling addictive or are easily discouraged may struggle with the realities of trading. Investing may be a better option.
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Time - You'll need the time available to learn. As mentioned, the learning curve is steep - there is a lot to learn initially. You will need adequate time to study, practice, and trade. You'll be fine if you can commit an hour a day, five days a week.
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Patience - Learning to trade successfully will require patience. Building a trading portfolio and letting profitable positions run will also take time. If you act out of desperation or expect to 'get rich quick', trading is not for you.
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Money - You will need funds to invest in your trading education and start a trading account.
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A Willingness to Take Risk - Trading is not about taking significant risks with the hope it pays off. The best traders try to eliminate risk from their trading. However, you must be willing to lose money and have little emotional attachment to your trading account balance. Preserving trading capital but being willing to take small risks based on well-thought trading ideas is a must. ​
Forex Trader Self-Evaluation
Consider the following questions:
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Am I willing to study?
Can I commit 1-hour a day, five days a week?
Do I have the self-motivation and ambition to continue despite setbacks and failures?
Do I have some available money for trading education and to open a trading account?​​
Can I wait 6-12 months before seeing results?
If I lose my trading funds, will I still be in a healthy state financially and emotionally?
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If you answered 'yes' to most, if not all, questions, you may have what it takes to become a trader.
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Below are some common questions asked by new traders. If you have questions, feel free to email me at samuel@love-the-pips.com.
Question: How much do Forex traders make?
Answer: Professional traders who work for a bank or hedge fund typically make 125,000 to 180,000 a year. Independent (retail) traders from home can make anywhere from zero to millions.
Question: Is it possible to trade from home?
Answer: Yes. Online trading from home is possible. With proper education and the right mindset, you can be a successful trader from home.
Question: How much does it cost to become a Forex trader?
Answer: Trading education costs vary from zero to thousands. All the steps in this guide cost nothing.
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Your first trading account should only be funded with what you are willing to lose. Most brokers have a 100 minimum.
Question: How likely am I to be Successful?
Answer: Most traders don't make money. This is because they need to prepare better, get the proper education, or develop the necessary characteristics. If you passed my Forex Self-Evaluation and are willing to learn from me, your chances of trading success are much higher.
Question: What is the difference between trading and investing?
Answer: Trading is faster-paced and requires daily management. It aims to make the most of your capital by responding quickly to the market's ever-changing landscape.
Investing is for long-term growth. It usually entails investing capital and leaving it for several years.
"So, you've got what it takes to become a trader? Let me detail the steps you need to take to become a successful Forex trader. There is no hidden incentive. I want to genuinely help you. At any point, feel free to email me your questions"
How to Become a Forex Trader: Getting Started
Step 1: Learn the basics of Forex (Free)
First, save or bookmark this page. This way, you can return after completing each step.
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It may seem obvious, but you must start with the basics. You need to understand what trading is, what Forex is, how to access the Forex market, which currencies are traded, which opportunities Forex offers, and many other foundational aspects of Forex trading.
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The best place to learn the basics for free (and with no registration) is my Forex Basics Course. You can take the course on this website and read along with the video content, or take the video course here.
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The course focuses on three areas: what Forex trading is, why trade Forex, and how to trade Forex.
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Alternatively, BabyPips is a fantastic Forex trading website for beginners. Their course does not have video content, and you cannot email a trader directly for support. However, it has some great features, such as interactive quizzes, which my course does not. Click here to access the BabyPips Forex basics course.
Step 2: Learn the basics of price action (Free)
Once you know the Forex market basics, the next step is to learn the basics of price action.
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Price action is the study of historical price data, such as price high and lows, patterns, and reversals. This data is available on Forex price charts. Price action is part of technical analysis.
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You must learn:
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How markets range
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How markets trend
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Swing highs and lows
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Horizontal and diagonal support and resistance
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Price reversal patterns
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Japanese candlesticks, including candlestick setups
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Once again, I have a free course (no registration required) that covers all of the above - my free price action course.
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If you prefer a paid course, check out the price action courses at Udemy.
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If you want to dive deeper into price action:
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Step 3: Learn the basics of technical analysis (Free)
Price action is part of technical analysis, so if you've completed step 2, you've made a good start.
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In addition to price action, technical analysis includes understanding and reading technical indicators. These indicators are chart formulas based on price data. They can help identify price direction, momentum, and reversal.
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You must learn:
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Trend indicators, including moving averages, Bollinger Bands, and Fibonacci.
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Oscillator indicators, including the relative strength index (RSI), the MACD and the stochastic.
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My free technical indicator course is a safe bet. I also have a page dedicated to understanding and using moving averages.
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If you have a natural love for technical indicators, you can find a full list of them here.
"Now you know the basics of Forex and technical analysis, and it hasn't cost you a penny! Let me continue to guide you and provide you with free resources to help deepen your trading knowledge. I'm so excited for you!"
How to Become a Forex Trader: Practice
Step 4: Practice technical analysis (Free)
You should know the basics of Forex, including basic technical analysis. Correct? If you still need to, please go back to step one and fill in any gaps in your knowledge.
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It's time to practice what you've been taught, including identifying price ranges and trends, drawing support and resistance, finding price patterns, and spotting candlestick setups. ​​
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The best way to do this is to open a free account with TradingView. Their price charts are superior, user-friendly and free.
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Practice everything you've learned so far. Any questions? Email me at samuel@love-the-pips.com.
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Here is an example of the price charts at TradingView:
Step 5: Practice trading (Free)
All Forex brokers offer free paper trading accounts. These are dummy accounts that offer a demo trading experience similar to real-life trading but with virtual funds.
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Before you can start trading virtual funds, you must understand essential aspects of Forex brokers, such as leverage, trading platforms, and their costs. However, there are no costs for a demo trading account.
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You can learn all about Forex brokers in my Ultimate Forex Broker Guide.
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Once ready, I suggest opening a demo account with IC Markets, Darwinex or CMC Markets.
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If you open a demo account with a broker who has the MetaTrader 4 trading platform, I have a free MetaTrader 4 guide here.
"You should now have a Forex foundation - you know the basics and have some experience. It's time to build on that foundation by learning more advanced aspects of Forex trading, including fundamental analysis"
How to Become a Forex Trader: Building on the Basics
Step 6: Learn Fundamental Analysis (Free)
Technical analysis is the study of price charts to help predict future price direction. In Forex trading, Fundamental analysis is the study of economic data to help predict future price direction.
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It includes tracking interest and inflation rates, unemployment rates, GDP growth, and other economic figures by country or economic area.
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Many newer traders skip fundamental analysis because they feel it's too hard to understand or because they believe technical analysis is enough. However, fundamental analysis is as easy as technical analysis, and it is an essential part of learning to trade successfully. Most losing traders don't trade using fundamental analysis, and they then wonder why they are not yet successful.
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Once again, I have a free Forex fundamental analysis course to teach you the basics.
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This is also an ideal time to start using a Forex economic calendar. These calendars schedule news events which will impact the FX markets.
Step 7: Learn Good Risk Management (Free)
The keys to successful trading are:
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Having a trading strategy which provides a trading edge
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Trading with little emotion
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Using strict risk and money management
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Trading strategy and overcoming trading emotions are future steps. For now, learning risk management is the next area of focus. ​
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Risk management (sometimes called money management) involves the habits, rules, and procedures that help reduce and, if possible, eliminate trading risk. The best traders are those who eliminate risk from trading.
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There are several ways to reduce risk when trading Forex, and my free Forex risk management course covers these.
"You've come so far! Well done! This is where things now become difficult but also more exciting! This is where many new traders give up. Take a break. Read a trading book. Once you're ready, prepare for the next steps, which will be the hardest yet"
How to Become a Forex Trader: Get a Trading Strategy
Step 8: Get a Trading Strategy (Free)
Things now get even more exciting! It's time to combine everything you know to develop a trading strategy.
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A trading strategy is a set of trading rules that provide an edge, i.e., they put chance in your favour, with the aim of making a profit. A trading strategy can also be called a trading system or trading plan.
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The best trading strategies are highly detailed but easy to follow. They cover areas such as:
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When to trade
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How to identify which currency pairs to trade
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How to identify price direction
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Where and when to open a trade
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Where to place a stop-loss
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Where to place a take-profit
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When to adjust your stop-loss
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How much to risk per trade
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Potential trading strategies should be traded on demo before trading live.
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As always, I am here to help you. I have a free guide to creating a trading strategy.
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Alternatively, you can learn the profitable trading strategies of others. You can learn my trading strategies in The Ultimate Forex Course.
Step 9: Keep a Trading Journal (Free)
A trading journal keeps a record of your trading history. It can include:
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Trades - A record of every trade, including analysis, entry, and exit details.
Emotions - How you feel on any given day and how your feelings impacted your trading abilities.
Equity Curve & Performance - Historical performance and an equity curve.
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I use an Excel spreadsheet as my trading journal. This is your free option.
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If you would like a more sophisticated journal, consider TradeZella.
Step 10: Overcome Trading Emotion (Free)
This is the hardest step - the biggest challenge.
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Over the years, I have met with countless unsuccessful traders. The challenges of trading emotions and trading psychology are usually the one reason why they fail.
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Trading emotions are negative emotions that negatively impact your trading performance. They include doubt, fear, greed, and impatience.
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Some traders experience these emotions once they are trading live, and others experience them intensely, even when trading demos.
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There is a lot I can teach you about overcoming trading emotions. My free guide is here.
"After completing my Ten Steps to Becoming a Forex Trader, some traders will still struggle to make money. If you need help, consider my Forex Mentor Program or learn my Forex Trading Strategies"
How to Become a Forex Trader: Additional Steps
Step 11: Get Funded
Once profitable, you may wish to 'get funded', i.e. trade with other people's capital. There are two options available:
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Qualify for third-party capital. A handful of firms provide third-party trading capital if you pass their entry requirements. This usually requires trading a demo or small live account and meeting trading requirements. Often, these firms charge for the opportunity to take their 'tests'.
Audacity Capital and FTMO are two of the most popular Forex funding firms.
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Open a copy trading account. Copy trading allows others to follow your trades for a fee. eToro and Darwinex are both FCA-regulated brokers which offer this service. eToro provides generous commissions based on the amount of capital copy your trades. Darwinex offers a similar service through a 'Darwin'.
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Trade for a fund or institution. With a proven track record and desired education you could become a professional trader for a fund. As a self-taught trader, you will have more success in applying for positions with independent hedge funds rather than large institutions.
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Start your own fund. You may wish to open your own proprietary trading or hedge fund. You can learn more about this here.
Step 12: Add Proprietary Capital
Building your portfolio through trading and saving is an excellent option if you are trading successfully. Remember, this is a long-term game. Traders become rich through consistent effort. Trading is not 'get-rich-quick'. Tony Robbins said, 'People are rewarded in public for what they've practised for years in private'.
Step 13: Continue Learning
'A wise man will hear and will increase learning'.
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Even if you are profitable, keep learning and seeking opportunities to grow. Read trading books, listen to Bloomberg, chat with other traders, listen to trading podcasts, and try new trading techniques. There is always room for improvement.
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You may find your trading is not full-time, so you'll have time to pursue hobbies, interests, and business opportunities.