Trading on the forex market is characterised by high volatility and a tenacity for managing risk to avoid large losses. To be a successful professional forex trader requires a set of skills that must be refined continuously. This is what we’ll be looking at in today’s article.
1. Keep learning
The forex market is one of the most active financial markets in the world, seeing a daily trading volume of US$6 trillion. To actively take part in it in a way that won’t see you lose large sums of money requires a proper understanding of the complexities that come with forex trading. There are several ways to do this, the key being continual learning. Regardless of how skilled you are at trading forex, staying educated is crucial. This means making use of any educational resources available to you, be these videos, articles, webinars, e-books, etc. Keep informed of the different tools for trading and analysis. Research different forex trading strategies and optimise your own accordingly.
2. Technical analysis
Become adept at technical analysis, particularly for day trading when you’ll be making multiple trading decisions in a day. Technical analysis is an essential skill to have as a professional day trader. It aids in identifying trading opportunities by analysing things like price movements and volume. It also takes historical trading data into consideration. Technical analysis can be applied to the trading of any financial instrument, e.g., stocks, currencies, commodities, etc. It is however more widely used in forex or commodities trading where the primary focus is on short-term price fluctuations.
3. Fundamental analysis
In contrast to technical analysis, becoming skilled in fundamental analysis is a vital long-term approach to analysing data, be this over a few months or several years. Fundamental analysts look at a company’s earnings, assets, liabilities, and expenses, together with the wider industry and economic data, over a specific period, before making the decision to invest in stocks. For professional swing traders and position traders who make use of a combination of technical and fundamental analysis, having the ability to properly apply both methods is key to potential trading success.
4. Technical indicators
Technical indicators are mathematical tools. They use opening and closing prices and volume to speculate on the movement of financial instruments or assets. Technical analysts use technical indicators when assessing the value of a particular instrument or asset. These indicators help traders optimise their traders. Professional forex traders must understand these indicators well to become skilled in mitigating trading risk and avoiding large losses. This means knowing how to properly interpret the data they generate and applying it to trading decisions. Some of the most commonly used technical indicators include:
- Moving average indicator (identifies price trends in the market)
- Momentum indicators (measure how strong or weak stock prices are)
- Oscillators (used when traders are unable to identify clear trends in stock prices)
- Support and resistance levels (measure surplus of buyers or sellers in the market)
- Volatility indicators (assess the state of currency pairs relative to volatility. Bollinger bands, average true range, Keltner channel, parabolic stop and reverse, and volatility squeeze are examples of volatility indicators).
5. Trading goals
Irrespective of your expertise as a professional forex trader, having specific goals is an important part of successful forex trading. Goals orient trading decisions. They provide a sense of direction and something to work towards. They also form the basis of a professional trading strategy, enabling a trader to better gauge performance, risk, and profitability from month to month.
6. Managing risk
It is well known that trading forex requires a specific tolerance for risk. This is due to the highly volatile nature of the forex market and the potential to lose capital if the risk is not properly managed. Professional traders typically have a risk management strategy in place relative to their trading goals or style of trading. This strategy will seek to quantify potential risk so that losses become measurable and identify the tools a trader must use to minimise risk (e.g., stop-loss or take-profit orders, or trailing stops). Beyond the scope of a definitive strategy, professional forex traders understand the benefit of exercising caution and constraint to make sensible trading decisions.
7. Choosing a reputable CFD forex broker
A professional trader will have properly researched a pool of reputable CFD forex brokers before settling on one. This is because a CFD forex broker plays a vital role in equipping a trader with the skills and knowledge needed to make better trading decisions. The criteria for choosing a renowned broker include:
- level of the broker’s forex trading expertise
- access to educational resources
- quality of their customer support across all channels
- features and functionalities of their trading platform (market analysis, charting capabilities, trade automation, customisations, etc.)
- insights on global economic markets and geopolitical news and events
8. Making use of a demo account
A demo account provides professional forex traders a way to continuously test their trading strategies and adjust where required. The demo account allows the trader to improve their trading skills by simulating a real trading environment through which they can practice trading forex in real-time using virtual money. It also offers essential market data and insights and indicates the potential for profit and loss as if trading with real funds.
9. Monitoring trades
To become a more professional forex trader, monitor your trades over a set period to garner historical data. Use this data to understand how your trades have performed and why. Review your trading decisions and reflect on the outcomes. Use this information to establish if adjustments to your trading strategy are required to achieve more trading success.
In conclusion
If you’d like to better your forex trading skills with a global broker, open a demo account with IronFX and practice your trades. Also visit the online IronFX School for a wide variety of useful educational materials to elevate your trading skills and to help you become a more astute trader.
Disclaimer:
This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced or hyperlinked, in this communication.
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