What it Takes to Trade Forex for A Living
Forex Blog Articles
Almost all traders dream of making it big in the industry to achieve financial freedom and self-employment through profitable trading on the forex market. This means the end of the 9 to 5 jobs, no more bosses to answer to, endless meetings, and free time to spend with your family. Is all that possible through trading forex for a living?
Yes, it is possible to make a more than decent living with forex trading. However, in order to do that, you must become a profitable trader. Once you are making consistent profits, and are among the top forex traders, you stand the chance to become a funded trader with your own funded trading account.
Learn forex trading strategies and styles, and how to implement them in your trades
There are quite a few trading strategies and trading styles, and it is very easy to get lost in them. Any trader needs to know the trading strategies and understand what is right for him, to start professionalizing them. If you try to contain all the trading methods, you will probably get lost.
Ask yourself, do you want to trade as a full-time job, or are you just doing it for additional income.
What is your nature – are you patient? Do you have discipline? Try to adapt the trading strategies and style to your character.
As you understand, there are quite a few trading strategies and styles. learn them, try to trade some of them and understand what’s right for you.
Once you know what’s right for you, you can focus on your strategy, and improve your abilities to become a professional trader.
Using a Demo Account to Practice Forex Trading Before Trading Live
Use the demo platform to experiment with various strategies. Demo trading can help you discover what type of trading suits you best and help you prepare for the real thing. If you lose trade in a demo account you can keep your calm, but a small loss in a real account might have a negative effect on your confidence as a trader.
To make demo trading as productive as possible you must trade the demo account as if the money was real. For example, if you plan to fund yourself with a $10,000 real account, do not trade a $500,000 demo account. Keep it as real as possible, the goal is to practice, not to play.
It’s very easy to find demo accounts, just go to any forex broker website. Brokers know that when you’ll feel ready to trade with a real account you will probably signup with them. That’s why it’s important for them to provide a demonstration account and trading platform that is like a real trading account.
When you open a forex practice account, you will get virtual dollars that can be used to measure your trading performance. With these types of accounts, you can practice your forex trading strategies and trading style, and test your trading skills without losing real capital, until you understand which strategies and styles are suited for you.
Remember do not open a live trading account until you are consistently trading profitably on a demo account and don’t open a real forex account until you consistently see that you can be profitable. Be tolerant and have discipline, it will pay off in the future.
How to Create an Achievable and Systematic Trading Plan
This is the framework of your trading plan. Make sure to have a designated notebook to make notes, keep track of your ideas and log all of your movements.
Set your trading goals, for examples:
- What’s your time frame?
- Will you be a full-time trader or part-time trader?
- What strategies are you going to use?
- Know what to do when reaching certain signals.
Keep it simple and easy.
The most important thing in your trading plan is money management.
- Know how much money are you willing to risk
- Plan your profits – decide how much profit you will take out and how to use some of the profit for your next trade.
- You must have clear core lines, so you’ll know what to do in any situation.
Psychology is the journaling section, writing a diary is a mental support system, it can help to place you in a mindful state to clear your confusion, making things more simple.
Use your free time and keep a notebook by your side to write down ideas or reminders during a busy day.
In addition to the profit and loss ideas, consider using it for the following:
- Make mental notes about how you are feeling right now
- How did you feel during a particular situation?
- What did you do well?
- What mistakes did you make?
- How can you get better?
Focus on what you can control, not what you can’t. You work alone and you need discipline and self-control. Make this introspection part of your daily routine. If you want to get better, you have to work on it consistently.
Take advantage of free tools on the Web
First things first, your computer needs to be clutter-free of unnecessary files. Next, have an alternate power source and find the best internet service, and portable wifi in case your internet randomly cuts you off.
Next, we’ve gone through all of the best and free money management tools and compiled them here in this useful guide.
MT4 Order Plugin
Easy Order is a visual and intuitive risk management tool for Metatrader 4. This tool is a very intuitive and visual way to manage your trade while knowing the script will do the math for you as accurately as it can get. Set the script to prioritize by percentage from current balance, or by a fixed monetary value.
Money Management Excel Application
This independent Money Management excel sheet will be a great tool for you. If you don’t use an Advisor or Windows operating system or Metatrader 4. Its a great trainer in the theory of money management.
It has the same functions as the previous tool, with the only difference that you have to put the numbers in yourself. Using a simple calculator is highly recommended for new traders. It’s an excellent tool to know the numbers and to train the mind to use risk management layers for every trade plan.
Pip Calculator tells you how much each pip is worth.
Input the currency pair, asking price, position size, and the currency you’re account is trading in, and it will tell you how much each pip is worth.
High Impact Economic News Alert
Investing.com lets you create alerts for economic news releases. It’s free, and you can always be up to date when major market news is about to come.
Trendline Price Alert
Having a trendline alert is the solution for you if you trade with diagonal trend lines. Once the price hits the line you will receive an audio alert announcing the price hit.
Tradingview Condition Price Alert
Here you can create conditioned alerts notifications.
You can use various combinations of alerts, from trendlines, joining lines, and other patterns. You will receive alerts in the form of audio, email, SMS, or pop-up notification.
FxCraft – Money Management Expert
With this tool, you can manage your position even while it’s open. It lets you set ahead, and to set when the stop-loss order eventually rolls to break even automatically.
Another important feature is the cancel level line. After setting it, when the price crosses it, pending orders will be canceled.
How to Calculate Forex Position Sizing/Lot Sizing
A very important element in risk management is to understand position size which is defined by Lot size, this article will explain how to consider risk in your local currency terms, understanding the calculation of position size/ lot size is important for risk management.
If you know how much you want to risk and how many points you’re about to risk, the calculator will deliver the number of lots you should buy.
Understand Risk Management
The importance of Managing your position
Trading is not a gamble before you go into a position you need to know, what do you want from that trade, where you place the stop loss and where are you going to take the profit.
You must decide whether you are buying and set and forget, or managing the position while on the move.
Getting into a position without knowing what you want and how you intend to manage it is likely to end in a loss.
Use calculators to calculate stop loss, or to calculate the pip value.
How to deal with leverage
In forex it is very easy to get leverage, high leverage and the numbers can vary from 25 to 1, all the way to 4000 to 1.
Therefore, as you can earn very well from trading thanks to leverage, it is very easy to absorb heavy losses.
It is not that leverage is not recommended, but know that you can certainly earn well in Forex even without it, if you are disciplined and know-how to work properly and manage your order, you certainly can earn well even without leverage.
Be attentive to the news
It is very important to listen to the news, obviously, when you are with an open position or intend to enter one.
In the age of social networking, just one Twitter tweet about a trade agreement is enough to move markets.
That is why you should always be attentive to the news as well.
invest money you don’t need, set your risk
You have to figure out how much of the money you have, you could risk, that’s exactly risk management.
You don’t want to trade a high amount of your money and risk losing it.
If you have lost an amount of money that is difficult for you to recover, then you are trading too much, so be careful.
Losses are part of trading and you have to learn to accept them, and you have a plan for how to recover from them.
Also, keep in mind that your moods have an effect on your trading as well.
being nervous or tired is part of your trading, your moods can influence your trading decisions.
Therefore, it is best that you prepare yourself for any scenario and know how to handle such a situation.
Trading Stats and Facts
If you have been thinking about trading for a living, here are some of the stats and facts you will come across:
- The common claim made by people is that 90%-95% of the trader’s loose in trading.
- Among the rest of 10% – 5%, there are only a few individual traders while the rest are hedge funds, institutional and banks.
- The big players rule over 90% of the market liquidity and can create movement in price.
- Traders with more experience do not afraid to cut losses
- Beginner traders have the same self-confidence as experienced traders in trading
Who is a Profitable Trader?
It is important that you understand how you can trade for a living, and what steps you must take to become a profitable trader. Once you are profitable, you will catch the eye of trading proprietary firms, like The5%ers, who can help you take the next step in your trading career.
Very few forex traders manage to find consistent profitability in the forex market, mainly because of the volatile nature of the forex market. The goal of every trader is to get consistent results with their trading strategy on the forex market. This is easier said than done. The key to achieving profits on the forex trading market is by reading the market and adopting the habits and characteristics of profitable traders. This is what sets them apart from the rest.
In general, profitable traders are those who consistently make good trades, and tend to win more trades than they lose. Therefore, making profits from their trades on a consistent basis allows them to gain financial independence.
How to Define a Profitable Trader?
There are various types of traders in the market, but not all of them manage to bring in consistent profits with their trades. A profitable trader will have in-depth knowledge of the forex market, be consistent with their trades, be focused and professional when making trades, and don’t allow their emotions to sway important decisions when trading on the market.
These are all characteristics that define profitable traders, separating them from the rest. If you plan on making a living through trading forex, you must adopt the practices and habits of profitable traders to be noticed by leading proprietary firms in the industry, like The5%ers.
Should You Use Leverage in Forex Trading?
Most people will disagree and think that you have a financial death wish if you decide to leverage your trading skills. This is mainly because the traders’ failure rate in the forex is extremely high. Some rough estimates suggest that 95% of people who begin trading for a living end up failing and losing all their money. The argument against trading is based around using leverage in your trading. This effectively increases your exposure to a market, but substantially increases your risk as well.
You’re not only putting your own funds at risk but also increases the risk to the percentage you have leveraged. However, you can adopt a lot of ways to reduce this risk. The biggest takeaway from this is that if you don’t use leverage while trading, you are losing out on a lot of profitable opportunities. Hedge funds also use leverage in their strategies with great success, so there are some positive benefits you can gain from them.
To paint a clearer picture, we will discuss the pros and cons of leveraging your trading skills:
The Pros of Using Leverage
If you do leverage your trading skills, you end up maximizing your chance of making successful and profitable trades. This can be done by managing a small fund and increasing your returns exponentially. It is an inexpensive method when compared to borrowing. There are also multiple ways you can minimize your risk through stop losses and risk mitigation.
The Cons of Using Leverage
The major downside of using leverage is that you will be increasing your risk by borrowing funds and jeopardizing the value of your position. Any decrease in the value of the instrument will put you at risk of losing the entire account. This additional cost can leave large holes in the account balance over a prolonged period of leveraging your trading skills.
Options for Trading in Forex for a Living
For those lucky enough to become profitable traders in the forex, there are various options for trading in forex for a living. There are pros and cons of everything, and we have listed some of them for good measure, so you can grasp the reality of trading in Forex for a living clearly.
Self-funding accounts are a popular choice for trading in forex since they allow greater independence and financial freedom to traders. There are no rules that govern your trading style, you can trade with your money, meaning not following instructions of any clients. You don’t have to report or answer to anyone and you have complete freedom to take risks and adopt any trading strategy.
However, at the end of the spectrum, you will be risking your own money, and with no one to discipline you or provide you with feedback, you can make some big errors. There are no rules to follow, and when it comes to forex trading, you need discipline and an organized structure to find success. It is also the most difficult method for growing your account since you are trading on your own.
Trade for an Exclusive Clientele
You can choose to trade for an exclusive clientele if you have been a successful forex trader in the market, which means you will be the one calling all the shots. This is a good option because you won’t be taking all the risks and will only be leveraging your skills when trading with other’s money. If you get good results, you can easily grow your account and attract attention from more clients.
The challenges you will face when trading for exclusive clients is that you will be constantly under the microscope and be pressured to deliver results. Your trading performance will be scrutinized and depending on that the risk and drawdown tolerance of your client may change as well. You will need to be dedicated and committed to delivering good results for your clients, or else they will leave.
Work for a Fund or Institution
Most profitable traders tend to work for a financial institution or fund, as it allows them to hone their skills, fine-tune their tactics, and earn a stable income. They have support from other traders readily available and on top of that, they will be trading with high capital, allowing them to take more risks.
The downsides of working for a fund or financial institution is the stressful work environment, having a boss over your shoulder, and the extremely competitive nature of the job. This is mainly because the goal of funds and financial institutions is to make profits, and only the best survive. Losing a couple of trades may result in you being fired by them.
Trade for Copy Trades Platforms
A lot of profitable traders tend to trade for copy trades platforms as they get complete freedom to use their desired strategy, trade at their own time, and don’t have to answer to any clients.
However, this also makes it difficult to stand out as these platforms can be easily manipulated. You will only be paid for a share of the spread, not the profits you bring through your trading.
Trade for a remote Prop Firm
The best choice in our view for profitable traders looking to trade for a living is to join a proprietary trading firm, like The5%ers. Trading for a prop firm or prop shop is extremely popular among traders. It allows you to trade at your convenience, with no boss over your shoulder. You also have the freedom to trade with your strategy, trade with high capital, and stand the chance to steadily and exponentially grow your income.
Trading Forex for A Living – The Bottom Line
If you plan on making a career in forex trading, your primary concern should be to find consistency in your trades. This will set you on the path to becoming a profitable trader. The success rate for traders in Forex isn’t the highest, but if you’re determined to trade for a living you must do everything you can to become a funded trader for a proprietary trading firm like The5%ers.
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