So, you want to be a successful Forex trader.
You’re probably wondering how to start Forex trading from home.
Well, you are in the right place.
It doesn’t matter if you’re in the U.S., Nigeria, India or anywhere else in the world.
In this guide, we will show you the EXACT process you need to follow if you want to build a successful Forex trading business.
(You’ll find this guide useful even if you’re not a beginner.)
We’ve got a lot to cover, so let’s get started.
#1 Educate Yourself
If you want to be a doctor, you need to learn medicine.
If you want to be an architect, you need to learn architecture.
If you want to be a Forex trader, then guess what?
Of course!
You need to learn how to trade currencies.
Now, we know what you are thinking… There is so much information out there, I don’t even know where to start.
But don’t worry about it.
We’re going to walk you through the specific areas you will need to be familiar with.
Learn about the Foreign Exchange Market
Have you ever met a programmer who didn’t know the basic elements of a PC?
Probably not.
Sure, to write an awesome software, programmers don’t have to know how to fix a broken computer.
That’s the job of the mechanic.
But every serious programmer has a basic understanding of the tool they’re working with.
Now, in Forex, you don’t have to write programs (although you have the opportunity to do so).
But it helps if you understand the characteristics of the Forex market.
In order to make your job as easy as possible, we wrote an in-depth Forex market guide that will explain everything in plain English.
So, make sure you check it out.
Understand the Mechanisms of Forex Trading
The Forex market has its own set of trading conventions.
For example, the way prices are quoted and orders are executed are somewhat different from other financial markets.
It may take some time getting used to, but again, we have got your back.
Our Forex trading guide is designed to teach you everything from scratch.
Master Technical Analysis
Technical analysis is the KEY that turns the seemingly random price movements into an endless stream of opportunities to make money.
Say whaaaaat?
It gets better.
99% of the rules, tools and techniques employed by technical analysis is the same in the stock and Forex trading.
Awesome!
So, you need to know technical analysis.
But where do you start?
First, head over to our Forex market analysis guide and scroll down to the technical analysis part.
You want to read the entire section to have a basic understanding about technical analysis.
Second, go back to the individual sections and read the linked guides as well.
Nice!
This should be enough to get you off the ground.
You can also check out our resources page where we listed all the books that we found useful.
Be Familiar with Fundamental Analysis
Forex fundamental analysis is all about determining whose economy is doing good and whose economy is doing less good.
Interest rates, employment rates, inflation, you name it…
We’ll be honest:
If you are an average retail Forex trader, you probably don’t have to go crazy about fundamental analysis.
And by average, we mean that you don’t intend to hold trades for months or years.
If you do, then you do have to cover it more thoroughly.
Either way, go back to the market analysis guide and read the fundamental analysis part to have an idea about how this approach works.
Then, if you want to learn more about the topic, here’s a great way to do so:
Head over to DailyFX.com and read some of the weekly fundamental forecasts.
At the bottom of each currency’s page, you’ll see something like this:
Click to the “Previous Articles From XXX” tab to see relevant data for that currency.
Read some of those articles as well.
Don’t worry if you find new terms or something that you don’t understand.
Go and Google them up:
If you keep doing this for a while, you will eventually learn most of the fundamentals that can affect the different currencies.
#2 Treat Trading as a Business
This second step is essential for your success.
But what does “treat trading as a business” actually mean?
Let us break it down for you:
Have Enough Starting Capital
According to research, lack of sufficient capital is the second most common reason why startups fail.
(The first is the lack of a market need for their product.)
With that, the well-known saying “It takes money to make money” seems to be true.
After all, it probably does not come as a surprise that you need money for trading with money.
The big question is: How much money do you need?
Here’s the most accurate answer:
“It depends.”
Let us explain:
We recommend risking no more than 1% of your trading capital on a single trade. (2% is the absolute max)
That means if you deposit $1000, you shouldn’t take more risk than $10 per trade.
Let’s take an example:
(And let’s forget about trading fees for the sake of simplicity.)
- You deposit $1000
- You work with a 1:2 risk to reward ratio
- You win 50% of your trades
In this case, you would make a profit of $50 after 10 trades.
Now, if you keep following the 1% rule and your results remain similar, you won’t run out of money.
Even if things turn worse, you could easily adjust your trading approach as even 10 consecutive losses would only mean a 10% loss of your capital.
So, if you’re satisfied with a VERY modest monthly revenue from your trading, then depositing as little as $1000 might be a viable option for you.
However, if you want to make more money, then you also need to deposit more.
It makes sense, right?
Otherwise, you could only achieve larger returns if you take higher risks.
That could work for a while but eventually, you would blow up your trading account.
Why?
Because sooner or later, even the best trader experiences a series of losing trades, and if you are undercapitalized, that throws you out of the game.
So, if you had asked, “How NOT to Start Forex Trading,” rather than “How to Start Forex Trading,” the answer would have been simple: without money.
You can read more on how much money you need for forex here.
Create at Least One Trading Strategy
Businesses need products or services to generate revenue.
Do you want to make money in Forex?
Fine. Then you need to create a product: It’s called a trading strategy.
A trading strategy consists of a set of rules and triggers to help you find potentially profitable trading set-ups.
You can always create more than one strategy for different market conditions.
Now, if you hear the word “trading strategy,” and you think about something like this:
…change your thinking.
Simplicity needs to be your goal.
Without too many distractions on the chart, you can focus more on the price and on the correct implementation of your trading plan. (See a little below.)
Of course, you can create extremely difficult strategies, but there’s just no reason for that.
Either way, without a trading strategy, you are on a good path to being a nonprofit business.
Create Your Trading Plan
A trading plan is your business plan.
It’s a comprehensive approach that contains your trading strategy (or strategies) and also covers other crucial elements of your Forex business.
Take a look at the image below to see some of the basic things every trading plan must cover:
A complete, thoughtful trading plan is one of the most valuable tools in helping you reach your long-term goals.
First, it helps you to focus on the specific aspects necessary for your trading business to succeed.
Second, it helps you to achieve both your short-term and long-term objectives.
You have probably already heard the famous quote from Benjamin Franklin:
“If you fail to plan, you are planning to fail!”
So, don’t skip this part.
Test and Test and Test Even More.
Okay.
You have at least one trading strategy in your trading plan.
Now what?
Of course, you have to test it.
Just because it looks good in theory doesn’t mean it also works well.
Businesses that don’t test in advance, whether there is a demand for their product or service, take an unnecessary risk.
Unfortunately, trading is risky enough, so there’s no reason to make it even riskier.
You’re probably wondering: How can Forex strategies be tested?
Here’s a simple and free method you can try out right now:
Head over to TradingView and type a symbol of a currency pair into the search bar.
After you hit enter, you will see an overview window that will be similar to this one:
Click the button on the top right corner that shows “Full-Featured Chart”:
It will take you to a pretty advanced chart with all sorts of technical tools.
We have customized our chart a little bit, so don’t worry if yours doesn’t look exactly like this.
In fact, you need to do the same thing.
Dress up the chart in a way you want and put on the necessary indicators for your strategy.
When you’re done with that, click on the “Replay” button on the top of the screen.
A red vertical line will appear on your chart.
It marks the starting point of the backtesting process.
Scroll back on your chart far enough and once you are ready, just click somewhere.
As you can see, we went back approximately a year to 2017.
You can easily start replaying the market by clicking on the play icon.
Whenever you find a trading opportunity, note down things like:
- When you would enter into the trade.
- Where you would place your stop loss.
- Where you would place your take profit.
- The outcome.
You can download our FREE template that you can use for documenting your backtesting results.
Keep in mind that you always need to respect the rules of your trading plan while testing your Forex strategy.
Now, there’s only one problem with this technique.
It takes a lot of time.
And if you’re a busy person, this is a serious one.
So, is there an alternative?
Sure.
It’s called ForexTester 4, an awesome backtesting software that will make the whole process faster, convenient and more accurate.
It’s not free, but it has a free trial version, so you can try it right now.
Please note that if you purchase we may earn a commission. We’ll never point you to a product or service that we don’t believe in or have first-hand experience with.
Choose the Right Forex Broker
Your Forex broker is your business partner.
Needless to say, you have to choose wisely.
You can’t go to any company whose ad you first bump into, as you can easily get scammed.
So, the question is…
How do you find a Forex broker you can trust?
The most important is to pay attention to the regulation of the company.
There are a lot of Forex regulation authorities, some of the most recognized are shown below:
If you’re in Europe, you need to know something:
(You can skip this part otherwise.)
Both CySEC and FCA comply with the revamped version of the Markets in Financial Instruments Directive, commonly known as MiFID II.
The first MiFID has been around for a while across the European Union.
In essence:
It’s a legislation for removing barriers to cross-border financial services within Europe.
It means that brokers who are regulated by CySEC or FCA can offer their services for clients all around the European Economic Area.
Now, the good thing about the second version of MiFID is that in addition to making the original principles even more effective, it also puts a greater emphasis on investor protection.
If you’re from a country that is part of the EEA, you can use FCA or CySEC regulated brokers, and your chances of getting scammed will be significantly lower.
Okay.
So, make sure your broker has proper regulation.
There is a second thing we recommend you do:
Go to ForexPeaceArmy and type in the name of the broker you want to look up:
If there are any issues with that broker, the FPA will tell you:
In addition, clients can also rate brokers, but that part is not very accurate.
It’s because, most traders will lose money and will blame their broker for no reason.
You can take a glance on the comments section but maintain your objectivity.
After all, if you want to keep things simple, we recommend trading at XM.
They are properly regulated and operate with the client in mind.
(In the spirit of full transparency, note that we do receive payment if you choose to open a live account. This comes at no additional cost to you. Please understand that we recommend them because of the quality of their services, not because of the money we make if you decide to sign up)
Keep a Trading Journal
Businesses have accounting systems, traders have trading journals.
Or at least successful traders have…
A trading journal is a simple document in which you measure and track your trading performance.
We created a quick checklist for you about the things you should cover.
Fill out this simple form below and grab your free copy!
Let’s be clear:
If you don’t keep a trading journal, you won’t do well in Forex.
Why?
Well, you can’t really refine your methods and master your trading psychology if you don’t know what your strengths and weaknesses are.
That is to say, you need to be OBSESSED about improving your performance in order to reach your goals.
If it works for professional athletes, it will work for you as well.
Have a Long-Term Vision
Most businesspeople open their business because they believe in what they are doing, and they have a long-term vision.
No matter how BIG your goal with Forex trading is, we can tell you it’s not impossible.
But let’s face it:
If you were to start a new venture in any field with little experience, you would be happy just to be in business one year from now.
Or maybe, you are pretty optimistic and hope for a small profit.
But either way, you probably wouldn’t think that you could go and buy a Lamborghini right after your first year in business.
You’d have to travel down a long road if you want to achieve that.
Put another way: you won’t make millions of dollars anytime soon.
If anyone promises a trading system with 100% accurate signals, run the other way. There are no guarantees in the world of Forex.
#3 Take Responsibility for Your Actions
Here’s the thing:
If you want to be consistently profitable, you have to start from the premise that no matter what the outcome, you are completely responsible.
A responsible person makes mistakes, but when they do, they take responsibility and make it right.
Don’t think it’s a big deal?
Think again.
Especially when you enter into an unplanned trade, it’s much easier to blame someone else for your own mistake.
Your friend gave you a bad tip.
Your broker’s system froze.
Or the president tweeted something that screwed up your trade.
But here’s the hard truth:
Every trade has the potential to be a winner or a loser.
No matter how good of an analyst you are, there will always be something unexpected that you couldn’t take into consideration beforehand.
And there’s nothing wrong with that until you follow your trading plan and open your trades based on favorable probabilities.
You may have some losing periods here and there, but in the long run, you will make money.
However, when you become undisciplined while shifting the responsibility to someone else for your losing trades, you will struggle to make any money.
Don’t fall into this mistake.
Follow your trading plan and take complete responsibility for your actions from the very beginning.
#4 Sharpen Your Skills on Demo
By this time, you have an overall knowledge about the Forex market, you are treating your trading as a real business and you are willing to take responsibility for your actions.
Cool.
It’s time to trade live, right?
Wrong.
Before you go to live, you need to register a demo account first.
Fortunately for us, all reputable Forex brokers provide a free demo account for their customers.
The question is: Why is demo trading important?
It all boils down to two things:
First, you need to learn how to use the trading platform.
And for that purpose, we think we can all agree that a risk-free demo environment is the best choice.
Second, it helps you to prepare for the real thing.
Use the demo platform for a couple of weeks, discover what type of trading suits you the best, experiment with various strategies, etc.
Don’t forget to document your trades in your trading journal.
(You can create a new trading journal specifically for this purpose.)
The point is to get used to this process.
Once you are done with that, head over to the next step!
#5 Register a Live Trading Account with a Small Fraction of Your Capital
It’s hard to say when you’re completely ready to switch from demo account to live account trading.
Let’s say you made the choice.
But what if you have overestimated your progress?
That sucks.
That is, until you only deposit a small fraction of your capital when you first start live trading.
If you made it this far, you are disciplined enough to pull this last step off.
The truth is: live trading is WAY different from demo trading.
Not because a demo environment is manipulated or something.
It’s not the case.
The thing is that something called “emotional factor” comes into effect when you’re risking your hard-earned cash.
Although you probably have an idea about yourself, you can’t know exactly how you will react under this kind of stress.
The only way is to try it out.
And we bet you don’t want to do that with all your money.
#6 Trade for a Living
If you go through all the steps we discussed in this post, then trading for a living will not be a dream but a reality for you.
But you know, you have to put in the hard work.
You will certainly have losses along the way.
You will probably fail here and there.
But if you stand up and go forward, you will eventually get there.
Just remember this one: An average trader is a loser.
You have to be well above average if you want to at least break even.
And you have to be a true CHAMPION if you want to make money.
But if you’re persistent, there will be a day when you can proudly say:
“I made it.”