The motivation behind every newbie trader joining the forex trading community is the profitability and success of expert traders who trade for a living. You can see such success stories on social media and the internet. Even the books that you read for learning about forex trading as a beginner are written by successful traders with years of experience and expertise. Every trader stepping into the forex market dreams about reaching this level of success. However, transitioning from a novice to an expert trader is not an easy process to begin with. You will need some guidance, advice and tips to move forward in your trading journey with ease.
In this article, I will help you get started with the transition by sharing some practical tips that are simple yet powerful enough to lead you toward success.
1. Learn the basics before trading
Trading can be tough for a beginner in general but not knowing the basics makes it even harder and also riskier. One of the key traits that distinguishes an expert trader from a novice trader is the ease with which they can make trading decisions. They are not impulsive but at the same time, they are not indecisive like how new traders tend to be when they are overwhelmed. There is no dilemma or confusion as a seasoned trader is very clear about the direction in which they should move.
They are well-versed in the basic concepts whether it’s fundamental or technical. That’s how they are able to move to an advanced level later on. Because if you don’t know the basics, you will never be able to go beyond the beginner phase. You will keep making the same mistakes and won’t be able to improve at what you do. For instance, newbies will have a tough time using trading platforms while expert traders are good at it as a result of continuous practice and hands-on experience in trading.
For instance, both MT4 and MT5 platforms are considered to be user-friendly and offer a lot of tools. MT5 platform is superior as it offers many additional features that you won’t find in MT4, like more order types, more indicators and so on. But if you don’t know the basics about how to use these types of orders while trading, you won’t be able to make good use of the platform. Hence, new traders should not shy away from taking their own time to be thorough with the basics as being a slow learner is better than making costly mistakes by rushing the learning process.
2. Develop analytical skills
Another quality that gives an edge to an expert trader is their sharp analytical skills which are essential for assessing the market situation and making calculated moves. The trade position you enter will result in a profit or loss after the market moves and those who are able to anticipate the potential currency price fluctuations with precision will end up being successful in forex trading. For this, you need to rely on technical analysis or fundamental analysis. Your analysis can also be a combo of both approaches which makes it more accurate.
In technical analysis, you will be looking at the price changes and the patterns they form on candlestick charts which is the norm in forex. You will be decoding the market situation based on the patterns you see on the chart along with some technical indicators that can be used to confirm your analysis and also for deciding the best entry and exit points for the trade. Fundamental analysis, on the other hand, assesses the impact of economic indicators, news events and key economic data releases on currency price changes.
Fundamental analysis requires in-depth knowledge about the market along with some experience in trading while the market is moving as a response to an economic event. Technical analysis would be easier for a beginner but you will have to learn about the basic concepts of chart reading and pattern recognition. Just identifying a pattern is not enough as how well you can interpret it determines your skill level as a chart analyst.
Be adaptable and modify your strategy from time to time
One thing about the forex market that fascinates everyone is how fast it can change and shift due to global economic events or geo-political issues. All financial markets respond to such events but the currency market is more sensitive and can undergo drastic changes after impactful economic events. Hence, you cannot make profits with the same approach or strategy forever. In fact, being adaptable to the changes in market situations is important to become a successful trader in the long run. Experienced traders are flexible and adapt to any situation as and when needed by revising their strategies.
Many of the expert traders even have different strategies that they employ after what they find to be an apt one while analysing the market. This adaptability is missing when you are a new trader. Because beginners are always told to stick to their plan and strategy without breaking the rules or deviating from the original plan. But if you think one strategy is not yielding the desired results, you need to work on it to improve the trading performance. Sometimes, you will have to switch to another strategy if the current one is not in line with the current market scenario.
I would advise you to make use of a demo account to hone your skills and test your strategies before risking real funds. You should also utilise the backtesting feature on trading platforms to see how your strategy would have performed in the past. The market tends to repeat the patterns after specific periods and those who know this can shape their strategy in a way that fits well with the present situation.
4. Be disciplined and patient
Trading discipline and patience are very much needed to attain long-term success as a forex trader. Because lack of discipline leads to overtrading or impulsive trading which can have a negative impact on your trading performance as well as the results you get in the end. Now, one trait that you can notice in traders who overtrade or place trades in a moment of impulse is that they are impatient and restless. They often enter the market with unrealistic goals and expectations. But then they get disappointing results which makes them frustrated and stressed.
Novice traders are prone to losing a lot of money if they get into overtrading or emotional trading as they neither accept the losses nor the reality that forex is not easy money. They are driven by greed and take excess risk with the hope of recovering the losses or making it big. However expert traders are mature enough to know the fact that overnight success is not something you can achieve in the forex market. Building a successful trading career takes both time and effort.
You may not become profitable from the first day itself and should be willing to wait until you decode the market dynamics. But once you get there, you should not lose your head as following a rational approach is vital for growth. You should aim for consistency rather than quick results. Don’t try to flip your account by using excess leverage. Only risk what you can afford and be disciplined while chasing your trading goals. Make use of different trading calculators to calculate position size, leverage, margin, pip and profit to plan your trades smartly.
5. Review your results
The last tip for transitioning from a novice to an expert trader is a periodical review of your results. For this, you need to journal your trades from day one with all the details about your strategy, analysis and the logic behind your trading decisions along with the results. You can see your entire trading history while going through your trading account but without a journal, you will feel lost as you may not remember the reasoning and calculations that led to these trades.
While reviewing your trading results, you need to check if you are sticking with your plan or not. If you are losing more than what you expected or not making as much profit as you targeted, you need to evaluate the performance of your trading system to detect any shortcomings. You should also ensure that the risk management plan is sound enough and make sure that your trades justify the risk/reward ratio that you have set. You may find many things that you can work on improving.
Such reviews are vital for enhancing your skills as a trader or else you will remain stuck at the same level without any progress. Identifying your strengths and weaknesses along with the issues in your strategy allows you to get better at trading over time. This is how successful traders were able to upgrade their skills as they took the journey from beginner to professional trader in the forex market.
Wrap Up
In a nutshell, trading is a skill more than a talent. You cannot enter the market as a perfect trader as you have a lot left to learn and experience, in order to find what works for you and what doesn’t. You need to personalise your strategy and trading techniques as there is not just one strategy that can work for everyone. So, do your research and try different techniques as keeping your options open takes you closer to the best ones, and finding your footing as a beginner will become easier as you enhance your skills.
