The primary reason many aspiring Forex Trading participants fail is that they ignore the foundational process.
In today’s world of quick-fix solutions, drive-thru menus, and expedient transportation, we often want everything NOW. In our “convenient culture” we have come to expect immediate results, often overlooking the basic principles of cause and effect. “I’ll have a Big Mac, large fries, with 10 milkshakes, and a vanilla latte!” Instantaneously, we hear the comforting words “Coming right up!”
When you seek success in Forex Trading, do not expect such an instantaneous response. Forex Trading is not a get-rich-quick method. Approaching it as one will almost inevitably lead to getting-poor-quick. Successful Forex Trading involves dedicated work; it requires a well-defined process. Let’s explore The Process of Forex Trading together.
Prepare
Process is defined as: “A series of actions or steps taken to achieve an end.” The first step in the process of becoming a successful Forex Trading participant is to prepare. Specifically, financial preparation is key – having the financial stability to invest money that you can comfortably afford to lose.
Never invest money that you cannot afford to lose in Forex Trading. Do not invest your last $2,000 hoping to quickly acquire the much-needed cash for next month’s bills. Trading with funds that you cannot afford to lose will place immense emotional pressure on you, exponentially increasing the likelihood of losing those funds.
Risking your and your family’s financial well-being is never wise. If you are not currently in the financial position to participate in Forex Trading, establish a goal to achieve financial security by this time next year. This approach will allow you to confidently invest in the future, and you will value that investment significantly more than if you had not worked intentionally and purposefully toward it.
Without a solid foundation of financial security, your trading endeavors are exceedingly vulnerable to the volatile storms of the Forex market.
Plan
Winston Churchill wisely stated: “He who fails to plan is planning to fail.” Having a solid trading plan is critical for anyone seeking success in Forex Trading. Without a plan, any profits you do manage to acquire are likely to be lost very quickly.
Your Forex Trading plan should include your trading vision, specific goals, and a well-defined strategy (the strategy being the parameters and plans on meeting your goals to accomplish your vision). These three essential components are paramount to a successful Forex Trading plan. Your vision will keep you motivated, even during inevitable setbacks. Your goals will help you track your progress toward your vision. The Forex strategy is what you will execute to actually see tangible trading results.
Omitting any of these three essential components will render your plan ineffective. A vision without a strategy is simply a fantasy. A goal without a vision can lack purpose.
Perfect
Now it’s time to begin trading! Step one: open a demo account. “A demo?! I want to trade live!” Be patient; this is a process!
It’s now time to perfect your plan through demo trading. Demo accounts are often seen as “practice” for beginners, but in reality, they serve as an invaluable Forex Trading tool for those serious about long-term success.
During this stage of the Forex Trading process, you’ll identify the flaws in your plan and make necessary adjustments. You can test different strategies and compare results. This stage of demo trading may last for several months. If you are not consistently profitable trading with a demo account, the chances of being profitable long-term with a live account are quite low.
Perform
Now, the long-awaited day has arrived – it’s time to trade live! It is advisable to begin with a smaller-sized account and progress accordingly. You will now consistently execute your “perfected” strategy with discipline. Never feel compelled to enter a trade, but when you do, always operate within the boundaries of your carefully crafted Forex Trading plan.
One of the most difficult challenges for Forex traders is managing emotions during trades. This is a primary reason why trading on a demo account is so crucial. By using a demo account, you can learn to make decisions not governed by emotional impulses.
Investors of all types are constantly exposed to the emotions associated with trading, especially day traders. While emotions are valid and understandable when dealing with money, letting them dictate your Forex Trading is a dangerous and detrimental position to be in. You must choose: will your trades be governed by your Forex Trading plan, or will they be influenced by fear, greed, and other emotions?
As you perform and execute your trading plan on a live account, you will undoubtedly encounter some setbacks. If you notice your strategy has stopped producing results, do not panic; this is part of the process. You can always revisit the “perfect” stage to further refine your plan. Consistent and strict adherence to your Forex Trading plan should be a priority, but equally important is flexibility and the understanding that the market is ever-changing.
Prosper
Being the largest market in the world, the Forex market offers countless opportunities for wealth creation. You are now among the minority of profitable Forex Trading participants. As FX Trading serves as a stream of income for you and your family, you will now be faced with choices. Should I add more funds to my account? Open another account? Diversify? Save all the profit? The opportunities are endless; the hard work has paid off, and the value of the process has been proven.
FX Trading is neither a sophisticated lottery nor a get-rich-quick scheme. Do not allow greed to push you into skipping essential steps in the Forex Trading process. Good things are worth waiting for. Persevere through the process. If your journey in FX Trading has been discouraging so far, you are not alone. Take a deep breath, revisit the process from step one, and commit to doing it right. Let’s make this year a time where we diligently follow the process, positioning ourselves for long-term wealth creation through successful Forex Trading.
Want to trade forex? Here’s a list of forex brokers to check out plus analysis and predictions for major currencies.