10 Facts That Every Forex Trader Needs To Know

10 Facts That Every Forex Trader Needs To Know

Apr 11, 2024
4 minutes

Many people enter the forex market dreaming about profits and a successful trading career which can be their path to attaining financial freedom. But just having a dream is not enough to earn profits and attain success when you start trading for real. Being a beginner, you need to gather as much information as you can by doing your own research and developing your skills through continuous practice. There are a lot of things that you have to learn as a novice trader but before that, you should go through this blog to learn the top 10 facts that every forex trader needs to know to unlock long-term success.

  1. It Takes Time To Achieve Success

The first fact is a hard pill to swallow for many as a vast majority of traders are here to make some quick bucks and leave. Hence, they often look for shortcuts that can lead to success without much effort. However, you should not invest money before you invest your time. Because the so-called shortcuts never work and you will end up wasting your valuable time by trying to find a secret formula. You will have to create your holy grail in forex trading all by yourself and it is impossible to do this in a day or two. So, accept the fact that it is going to take some time and be patient.

  1. Leverage In Limit Keeps Losses In Limit

Leverage is a powerful tool that can magnify your potential profits as a forex trader but it can also multiply the possible losses. Hence before you choose a high leverage ratio to earn bigger profits, you must remember the fact that leverage in limit keeps the losses in limit as well. Leverage does enhance your trading power as you get to open bigger positions with a smaller amount in account as margin requirement but with great power comes great responsibility. So, you need to be careful while trading with leverage and open trades only after checking the margin requirement using a forex margin calculator. 

  1. Live Trading Without Demo Account Practise Is Dangerous

Demo trading can feel boring and some traders skip this step as they are eager to make actual profits. However, risking real funds without any experience is not recommended in the volatile forex market. Demo account trading cannot be a substitute for actual trading experience but it does help in developing your skills and fine-tuning your strategy. This will not only boost your confidence but also help you avoid the common mistakes that many beginners make in live trading.

  1. Losses Are Unavoidable At Times

Success in trading does not mean that you end up winning all the trades you enter and making profits in every position that you open. You can keep the losses in limit by controlling the risk and following a sound trading plan but you will have to accept the fact that you will eventually encounter losses at one point or another. In fact, many traders will not be able to win any trade within the first few days when they switch from demo account to live trading. But you should not lose your spirit because of these losses and continue to move forward with a cautious approach. 

  1. Profits Belong To Those Who Take Less Risk

Many traders think that they will have to take more risks to earn larger profits. The risk and reward indeed go hand in hand but one trade that you lost while excess risk can eat away the profits that you earned from other trades that you won. Hence, you should minimise the risk and manage it effectively. One thing you can do to cut losses early is place a stop loss order and you can preserve the profits by placing a take profit order. Since currency pair prices are measured in pips, you need to know exact pip value to find the best price level for exiting. You can use a pip calculator to get the correct data right away.

  1. The Biggest Enemy Of A Trader Is Their Own Emotions

This is one fact that many forex traders fail to understand during the trading process. Our emotions are so powerful that it feels like we have complete control over our decisions but in reality, we are being controlled by these feelings and impulses. Hence, you must develop emotional control and remain rational while making each and every trading decision. Emotional trading is dangerous as you don’t apply any logic and end up encountering huge losses.

  1. Trading Will Never Be Easy

A professional trader will be able to trade with greater ease than a novice trader but this does not mean that trading is an easy thing that can be done by anyone. It is the years of experience and expertise that make trading easier over time. But you have to understand the fact that it is going to be a tough task when you are still in the learning phase. Success comes to those who are well-prepared to deal with the challenges and determined to accomplish their goals.

  1. Trading Is All About Numbers

This is a simple fact that you will get to know once you start studying the forex market and trading concepts. You should focus on the figures and facts instead of jumping to a conclusion based on mere guesswork. To execute successful traders, you will have to do a lot of calculations and accuracy is paramount to get desired results in the end. Hence, using tools like trading calculators is important to ensure precision in all the decisions that you make as a trader.

  1. There Is Only A Thin Line Between A Win and Loss

Many traders have this habit of celebrating too early when they see a winning trade but you need to remember the fact that the forex market can shift in a split second and thus there is only a thin line between a winning trade and a losing trade. The profitable trade can still end up in a loss if you don’t exit it at the right time. To find the best price level for exit, you can use a profit calculator that determines the expected gain from a trade based on the opening and closing price. Forex traders often let the winners run to maximise the profits but you must close the position before there is a reversal in trend.

  1. Opportunities Will Always Be There

The last fact that you need to know about forex trading is that there is no such thing as being left behind or losing an opportunity. You can always find opportunities as long as the forex market is there which is a very long time. Hence, you must not make any decision driven by FOMO and only trade when the risk is worth it.

Final Words

Finally, those who are aware of these facts can make their forex trading journey truly rewarding by setting realistic goals and taking steps to manage the risk efficiently. You can afford to take your time as long as you are not wasting it to find shortcuts.