The inclination and interest towards online trading are rapidly increasing over time as the advancements in technology and the growth of financial markets have opened the doors of financial freedom for all people who are willing to learn and take some risks. Read More
In this blog, I will share some tips that can help you climb the ladder of success as a part-time forex trader.
Forex Market – Facts & Figures
In order to kickstart your trading journey, you have to understand what trading in the forex market is all about along with some facts and figures that give you a bigger picture. If we look back into history, it is clear that the foreign exchange market has left all other financial markets behind by emerging as the fastest-growing trading place in the last few decades. The average daily turnover of the forex market was $1.5 trillion in the year 1998 and as per the BIS report of 2022, the turnover has increased to $7.5 trillion and the staggering growth is proof of the promising future.
Forex trading is done by placing orders to buy and sell international currency pairs as the traders anticipate potential price movements after analysing the market situation. If you think the value of a currency is about to rise, you will buy it for opening a long position and if you think that the currency value is going to depreciate, a short position can be opened to sell the pair. You have a chance to make a profit in both cases and that is the highlight of currency trading. However, a lot of learning, planning, analysis and calculations have to be done to carry out the trading process in an efficient manner.
Now, let’s move on to the tips that you should follow for making profits as a part-time trader.
- Prepare By Practising On A Demo Account
The complexity and risk will still be there even if you are not pursuing trading as your full-time career. Professional traders invest a lot of time and effort into learning the intricacies of the forex market and you should also do your best to educate yourself before risking your hard-earned money. Besides reading about the trading concepts, being familiar with real-time market conditions and gaining practical knowledge is essential to navigate the fast-paced market with ease.
The tool that I suggest for practising is a demo account which is a replica of a real account but virtual money is used to fund this Forex account free of cost. It is a simulation that keeps you safe from market risk and thus you can use it to experiment, explore and experience trading without the fear of losses. - Understand Your Risk Profile
How much risk you can afford to take as a part-time forex trader determines your risk profile. Because your risk tolerance has to be considered before making every trading decision whether it is about choosing a strategy to follow or selecting a suitable currency pair. Beginners should not be taking high risk in the initial phase and sticking to major currency pairs can minimise your risk to a great extent. - Set Realistic Goals
Bigger goals can be set with a long-term approach but they should also be realistic and attainable. Setting vague goals and chasing unachievable profit targets will not give any result in the long run as you will end up being disappointed. Many newbies even quit trading when things don’t go as planned. Hence, you need to set well-defined goals that are possible to realise for a part-time trader. - Develop A Sound Trading Plan
No goal can be achieved without planning and a strategic approach and having a sound trading plan is essential to trade in the volatile forex market. For developing a trading plan, you need to pick a timeframe for analysis after deciding on a trading style that resonates with you. Then, you have to outline all the steps, conditions, rules and techniques that will make the trading process logical and easier. - Find A Forex Broker
Finding a regulated and dependable broker is important to ensure a secure and smooth trading experience. When you are choosing a broker, you need to consider the trading conditions as your success rate is greatly dependent on the prices and speed at which your orders get executed. Trading with a cost-effective broker can maximise your earnings as your trading cost will be low. - Limit Risk Per Trade
You might be trading with a smaller amount of capital as a part-time trader but risk management is essential to safeguard your money in any situation. You should not be risking all your money in a single trade even if it is not a big amount. The risk per trade should be 2% of your account balance. Proper position sizing can be done by using a position size calculator and other types of trading calculators like pip calculator, profit calculator and margin calculator are also useful to manage the risk. - Place Stop-Loss Orders
The potential result of a trade can never be predicted with 100% accuracy as the probability of winning and losing can change any second as a result of sudden volatility in the market. But you can reduce the impact of losses by placing a stop loss order that closes the trade right away once the loss reaches the specified level. This way, your losses can be kept under control even if the market moves against you. - Keep Learning
The secret of long-term success is continuous learning and working towards improvement. When you learn more, you can enhance your skills which makes you a better trader allowing you to earn more profits over time. Placing more trades does not result in more profits but gathering more knowledge and experience can surely boost your trading performance, accelerating your growth.
Hedging In Forex Trading
Hedging is a strategy that can be used to offset the risk of a trade as you open another trade in the opposite direction. This strategy is a bit complex for a beginner but those who are good at hedging can reduce their losses by adjusting the trade size. This can be done by both full-time and part-time traders but you will have to learn more before trying to hedge.
Beware of Scammers in Forex
The forex market is a safe place for all as long as you are not falling into the trap of a scammer suggesting you take shortcuts. So, never trust something that sounds too good to be true and do your own research before taking any risk.
Bottom Line
In the end, a part-time trader who has enough time to spare can surely taste success in the forex market. So, stay committed to your goals and move forward with a professional approach.