Take control of your financial life — not just forex trading

Forex trading can be a nice little hobby on the side, a way to earn a bit of extra cash, or serve as a bit of excitement. It can also be much more.

For many, forex trading is a way of taking control of their finances. Employing smart principles to earn extra, somewhat passive income, and perhaps even break free of their 9-5 routine. However, that’s all much easier said than done.

There are no shortcuts for those who want to really get into forex and trade to get their finances in order. It will take time and effort, and the process will sometimes be grueling and frustrating. However, it is possible with the right approach.

This article won’t deal with the specific tactics and strategies needed to reach that point. After all, traders are different, and there’s too much relevant trading info to simply dump into a single article. Instead, it will deal with the mindset traders need and the right, level-headed approach to becoming a competent and self-sufficient forex trader. That begins with clearing up misconceptions.

Misconception 1: Forex trading is easy

Many online personalities will try to convince their audiences that forex is easy. Traders will see advice such as: just find this pattern on a chart, and the price will rise every time. Sometimes, traders themselves will see that an asset is trending and hop on a demo platform. They jump on that trend, make a few short-duration trades, and feel like it can’t be that hard.

In reality, it’s not nearly that simple. The gurus giving the advice are mostly intentionally misinforming traders to get referrals, and these short-term trades are mostly a fluke or a result of immensely favourable market conditions.

So why not only trade when market conditions are favourable? Unfortunately, it’s not that simple. First off, that isn’t a common occurrence, and second, forex is fairly unique in that regard.

It’s not like gold or oil, where an event can push the price way up. Since forex trading has to do with the balance of global economies, movements are normally more gradual, and even if, for instance, the European economy is doing well, EUR/USD may not go up because the US is also performing positively. Even if it does, the movements are usually slight and jerky because a large imbalance is unlikely, and firm resistance prevents prices from skyrocketing.

Misconception 2: You can get rich quickly with forex

Again, this misconception mostly stems from online personalities telling people what they want to hear to get referrals. In reality, most traders fail. This number, depending on the brokerage, can range from around 70% up to even 90%.

There are two main factors contributing to such high numbers. The first is that a lot of traders go in haphazardly, and woefully unprepared for the reality of the markets. The second is that even those who do prepare lack the experience necessary to navigate the strange, stressful, and oftentimes senseless behaviour of real markets. They, somewhat expectedly, get disappointed and quit before gaining the needed practical experience.

The right approach

Getting forex right is a gradual process and it requires effort. There’s no certain way to success, and those who want to reach financial freedom via forex will need to put in the hours. The next part of this article deals with the approach that traders who wish to find longevity in forex may want to take.

General forex and trading education

To navigate markets, traders need the knowledge to do so. That starts with education.

It may sound boring, but those who are interested in trading may find it fulfilling to learn all the small and interesting details. And there’s a lot to learn.

The best place to start is trader lingo. It’s difficult to get through articles and professional educational materials without it. Past that point, it may be wise to follow a course, either free or paid, since the number of things traders need to learn can be overwhelming, and courses provide a direction.

Taking it bit by bit and progressing slowly through different areas of knowledge will provide the best results. It’s smart to read, re-read, and revise until traders are confident they fully understand the topic at hand. With the rise of AI, traders can also use platforms such as ChatGPT to clarify and get specific examples of what they are learning.

Learning forex info for a particular area

After general trading education, traders should familiarise themselves with the currencies they intend to trade. Learning what makes them move is important in predicting what will happen. Here are some of the things that influence forex prices:

• Releases (inflation, interest rates, monetary policy, trade balances)
• Prices of important imports and exports for a region
• Political tensions
• News releases
• Major company stock prices

Mastering these will not only provide the needed info to predict the short term, but also give traders the insight needed to foresee what’s going to happen in the future and let them plan accordingly. A simple approach is to pick a currency pair, for instance EUR/USD, and then get informed about its regions (the European Union and the US, in this instance).

Also, it’s notable that trading EUR may be tricky due to the large number of countries comprising the EU. As such, newer traders may want to stick to single-country currencies like AUD, JPY, and NZD.

Practice

Getting proper knowledge is vital, but so is learning how to use it. Whenever traders learn something new or want to try a different strategy, they should strive to test it on a demo account.

However, that’s not where things end. While demo accounts will prepare traders for the strange occurrences that happen on the market, they don’t carry the same emotional weight as real trading does. As such, when a trader starts applying a new tactic, for instance, in their real account, they should invest a smaller amount of capital than they normally would until they are confident it will work.

Patience

All of the above requires patience. Traders need to take their time with everything in trading, learning, practicing, even choosing the right brokerage. Those who rush things often find themselves facing catastrophic losses, which may push them out of trading altogether.

Remember that a bad decision can negate days of progress. As such, devoting time to developing skills and planning will give traders much more longevity than knee-jerk reactions and getting swept up by hype.

Experience

Finally, few traders are able to turn a profit in their initial period of trading. It’s unfortunate, but most will need to get some experience before they can truly start to feel at home with trading. This also means some financial loss in most cases, and traders will need to mentally prepare for that.

As noted earlier, the markets sometimes behave in nonsensical ways. They may defy everything traders have learned. Experience will allow traders to either capitalise on these strange situations or get out before they suffer too much harm.

Just like with any skill, improvement in trading takes constant effort and repetition. And only when traders carry out that routine through an extended period of time will they feel able to carry out a plan that makes them feel like they are truly in control.

Disclaimer:
This information is not considered investment advice or an investment recommendation, but instead a marketing communication.