4 easy ways to start profitable Forex trading for beginners

Profitable Forex Trading for Beginners

It is the goal and aim of every Forex trader to become profitable in their trades, but that is easier said than done. Forex trading is a journey, and it’s always filled with losses as much as it is with profits, these two go hand in hand.

What makes a Forex trader stand out is not in their ability to trade without making losses, but the ability to always come out profitable in the long term. Profitable Forex trading, therefore, involves a lot of planning, learning, and strategies, this is aside from the technical, psychological, and fundamental skills needed.

Before we look at some ways to start profitable forex trading for beginners, let us get a deeper insight into forex trading.

Meaning of Forex Trading

Forex is a term that is familiar to almost everyone but not completely understood by many. Forex trading stands for foreign exchange trading and is sometimes also referred to as FX trading. It basically means the buying and selling of different currencies from all over the world.

Forex involves a huge market amounting to trillions of dollars. It may sound intimidating but it’s not really that hard to comprehend once we break it down into the basics.

Traditional business hours also do not exist in Forex trading. Business goes on 24 hours a day, except on weekends and world holidays. There are several main trading centers all over the world. The earliest to open is in Wellington, followed by Singapore, Hong Kong, Tokyo, Frankfurt, London, and then New York.

Before the New York trading center closes for the day, the one in Wellington is already doing business again. So the Forex market is indeed open 24 hours a day during the weekdays.

How Forex Trading Works

Even if you are not a currency trader, it is likely that you have already made a foreign exchange transaction if you have traveled to different countries. When you exchange your local currency for the currency of the country you are traveling to, that is a perfect example of currency exchange for practical uses. But how do people use currency trading for making a profit?

The value of currencies against each other constantly changes over time. In fact, in major currency pairs, rates change by the second. These price movements will lead to potential losses and gains in any forex transaction.

Let’s say you are trading in the EUR/USD currency pair, which means you are buying the Euro and selling the US Dollar. If over time, the Euro’s value increases against the USD, then the price of the currency pair will be higher. In this case, it is sensible to buy the pair as it is likely to yield a profit.

On the other hand, if the euro’s value drops against the USD, the pair’s value will drop as well. It would be a good idea to sell the pair before you incur great losses. Figuring out the best move at the best time is essentially the secret to becoming a profitable forex trader.

We have been able to give a little insight into what forex trading is and how it works. We would, therefore, be looking at some easy ways in which we can improve profitable forex trading for beginner traders.

Basic Steps to Profitable Forex Trading

Now that we have been able to establish the meaning of forex trading is about and how it works, we would look at the basic steps to profitable forex trading for every forex trader. The first on our list is:

Forex Traders Personality Types

The first step to profitable forex trading is understanding yourself, understanding the kind of forex trader you are and what category you fall into as this would help you better create a proper plan and strategy to make up for any weakness and improve on your strengths.

Your individual personality as a forex trader goes a long way in determining how profitable you can become on your forex trading journey. Highlighted below are various trader personality types, as a trader, you need to understand which best describes your personality.

• The Value-Driven Trader
• The Supportive Trader
• The Strategic Trader
• The Spontaneous Trader
• The Socially Responsible Trader
• The Planning Trader
• The Innovative Trader
• The Independent Trader
• The Fun Loving Trader
• The Facilitative Trader
• The Detailed Trader
• The Adventurous Trader
• The Artistic Trader
• The Administrative Trader
• The Accurate Trader

Not everyone can trade forex successfully, because some people do not have the mental or psychological balance to trade in the Forex market, making it more difficult to have a profitable forex trading career. Therefore, you need to determine the type of trader you are.

Following the list provided above you should be able to know what category you fall into and also know if you can become a profitable forex trader or not. Out of all the 15 personalities we have outlined above, only 2 of them have the highest probability to trade forex successfully; these two personalities are:

• Strategic Trader
• Planning Trader

The names given to these categories of traders will give you an idea of how successful such traders can be. Such traders can put together well-thought-out strategies that can make forex trading more profitable.

So only such a strategy can bring to reality the wealth opportunities available in forex trading. These types of personalities know how they can navigate different market conditions and pick out profitable trades because this is an ability lacking in many other traders. So traders that can only handle just one or two market conditions will rarely survive for long in forex trading.

If you belong to any of the other traders’ personalities mentioned in this section, then it means that you need to put in a lot of work before you can be as successful as the strategic trader or the planning trader. But if not, you will not be able to generate as much profit or record as much success as these two types of traders.

To read more about understanding how your personality affects you as a forex trader, you can click here to read the article.

Understanding Trading Instruments

Another key to profitable forex trading is the ability to choose or select the most appropriate instrument and market to engage in on your trading journey.

In online trading, there are many different types of markets that you can choose to trade. The popular name for these markets is trading instruments or securities. Some of the more popular ones are stocks, currencies, CFDs, commodity futures, and so on.

Each of these financial markets has its own distinct features. They all have their advantages and disadvantages. If you want to have the best trading experience, it would be wise to examine all these different trading instruments carefully so that you can figure out the best one for you.

It might take a considerable amount of research before you completely understand the workings of the different financial markets.

Time frame

Another noteworthy factor you need to consider as a beginner forex trader or a struggling forex trader if you want to have a profitable forex trading journey is the ability to choose the best timeframes that work for you.

The time frame you choose to trade on should align with your temperament. Some traders prefer working on a 5-minute chart to avoid overnight risk whilst others are comfortable with weekly charts which often make their positions exposed to risk and volatility.

This still takes us to our first tip, which is understanding yourself as a forex trader. As I have said the timeframes you love trading also determine the type of trader you are, some are long-term traders or investors as they leave their traders running for days or weeks and analyze the market using high timeframes like 1 hour, 4 hours, or daily timeframes. We can call these kinds of traders swing traders.

Some traders prefer lower timeframes like the 30 mins, 1-hour, 15 mins time frames, trading, trying to make their profit within a day, we can call these kinds of traders intraday traders. While some like making quick and instant profits, they are adventurous, and like the rush, they trade on smaller timeframes like the 5 mins, 15 mins, and 1 mins timeframes, and get in and out of the market almost instantly, they are called scalpers.

Therefore it is important to understand yourself first and the timeframes that suit your personality as it would go a long way in helping you on your forex trading journey.

Traders also need to assess how frequently they are willing to trade, the risk-to-reward ratio, and the opportunity cost of choosing a specific time frame.

Methodology

Another tip to having a profitable forex trading journey is the trading methodology. The methodology here simply means trading strategy. Therefore the trading strategy you choose needs to be consistent. It is of absolute importance that the trader applies a good strategy for successful forex trading. For example, some traders prefer to trade swings while others would rather hop onto trends. It is always a good idea to test a few strategies to find which one suits you best.

You can also read more on how to create a good strategy in our on risk management.

In conclusion, profitable forex trading is very possible and can be achieved. Following some of these steps shown here would get you far on your journey to becoming a successful forex trader.

For more helpful tips, you can visit the trading education category of our website to check out more valuable articles.

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