Retail traders just starting out in the forex market are often unprepared for what lies ahead and, as such, end up undergoing the same life cycle: first they dive in head first – usually losing their first account – and then they either give up, or they take a step back and do a little more research and open a demo account to practice. Those who do this will often eventually open another live account, and experience a little more success – breaking even or turning a profit. But is there a sure way to be successful?
So you have learned all there is to forex trading. Well guess what! You haven’t! There is always more to learn so you have to be persistent, meticulous and above all: learn when to trust your gut. This comes with experience. Everybody should start with a trading plan. But first you need to learn what kind of trader you are. Learn thyself and look into things like your behavioral, emotional, and personality traits. Patient, risk averse, disciplined or impulsive? You can determine what types of time frames fit your personality. If you are not a patient person then longer tf’s might not be for you and vice versa. Also look at different strategies and what appeals to you. Does it fit with your trading personality? Do not fight it, flow with it, so you can stay longer in the game (and keep loving it). Then demo trade the heck out of it to see if you were right in deciding what type of trader you are.
The most important thing is to know there is no holy grail. Work hard, make a plan and follow it meticulously without giving in to your impulses.
Which type of trader are you?
1. Short term. Are you a trader who looks to open and close a trade within minutes?Do you target small price movements and take advantage of them with a large amount of leverage? Then the good news is that you can have quick profit because of the rapid-fire nature of this type of trading. On the downside you need large capital and/or risk due to the large amount of leverage needed to profit from such small movements. That’s why people call you scalper.
2. Medium Term. Are you looking to hold positions for one or more days, often taking advantage of opportunistic technical situations? Then the good side is that you need the Lowest capital of the three types because leverage is necessary only to boost profits. The only bad point in this is that there are fewer opportunities because these types of trades are more difficult to find and execute.
3. Long Term. If you feel like holding positions for months or years suits you best, often basing decisions on long-term fundamental factors then you are looking at the long term type. You ‘ll have more reliable long-run profits because this depends on reliable fundamental factors, but you will need large capital in order to cover volatile movements against any open position.
According to Investopedia, retail traders are most likely to succeed using a medium-term strategy. The first type needs it to generate enough leverage, and the third to cover volatility. Although these two types of traders exist in the marketplace, they are often positions held by high-net-worth individuals or larger funds.
Automate the strategy creation process.
Trading software is out there to help you and provide you with the right tools so you can effectively create trading strategies that are successful. People are worried about the trading side and after a while discover that they lack strategy. Back-testing is only one piece of the puzzle, I think what you are really looking for is robustness testing. Firstly, you have to get rid of programming and automate the strategy creation process. This involves using special software with coded building blocks to do all the creation for you automatically via random generation of strategies. Since you are simply firing a gun at a very large logic space of possible strategies, the bad ones are dismissed and the good ones fall into your databank. Here is a helpful Practical Algorithmic Strategy Creation Webinar.
Decide how deep you are going to dig into your pockets.
Not everyone is made for this, you should have gotten that by now. Decide how much money is “enough” for you. Then do your own research and demo trading and when you feel ready go for it. Within this website you can find reviews of different forex trading software and the needs they cover. Whatever suits your needs and strategy best, is indeed the best one.