How to become a successful forex trader

How to become a successful forex trader
How to become a successful forex trader
Starting forex trading could be frustrating at first, but it will become easier as you get the hang of it. Sometimes you may take two steps forward and forced to take a step backward to reassess your trading plan and test your strategy.

New traders should create a demo account, before starting to trade in the live market. This way, they can test their abilities and practice trading before risking their real assets. In this article, we are going to discuss several factors, which could help you become a successful forex trader.

Different kinds of trading


A scalper looks forward to reap profit from a position, in just opening one and closing it within a few minutes. This kind of trading involves utilizing leverage to magnify the profit gained from a certain trade. Scalping occurs fast, therefore it is incorporated with a huge amount of risk. You could also lose all you have, in the blink of an eye, if you don’t have a proper risk management, due to high leverage.

Mid-term trading

In this kind of trading, the trader usually keeps his/her positions opened for several days. Traders usually take advantage of suitable technical opportunities. When trading with this method, you would probably need the least amount of initial investment among all methods. Mid-term trading also involves the usage of leverage to magnify the profit. Try to inform yourself about the proper usage of leverage, before levering your positions, since they also have the power to magnify your loss and destroy your portfolio in the matter of seconds.

Long-term trading

A long-term trader usually keeps his/her positions for several months or even several years. During this trading method, decisions are usually made based on long-term factors. The profit gained from long-term trading method is usually more reliable, since it is based on more reliable factors than the other trading methods.

You may have already figured that short-term and long-term traders would require a larger initial investment. The first one needs enough money to create lever and the latter needs it to cover fluctuations. Although these kinds of traders exist in the market, the majority are banks, financial institutions or wealthy individuals. Retail traders would probably be more successful with mid-term strategies.

The main success key in forex trading

The main success key in forex trading is focused on one concept: trading with the most probable estimation. To do this, we should study several techniques in different timeframes to specify whether the trading opportunity is reliable enough or not. However, keep in mind that this is not an automatic commercial procedure. It is rather a system, which helps you to obtain technical knowledge and make an informed decision. The main point is to find positions, which are confirmed by all (or most) of the technical signals. This trading conditions will generally be profitable.

Choosing a trading platform

We will use MetaTrader to show you this strategy. However, other similar trading platforms could be used. Essential factors of a good trading platform are discussed below.

A good trading platform should provide you the ability to draw different indicators such as the Exponential moving average (EMA), the Simple moving average (SMA), the Relative strength indicator (RSI) or other stochastic indicators.

Using technical indicators

To become a successful trader in forex, we should investigate the use of such indicators in our trading strategy. We will introduce several technical indicators which you could use to filter your analyses to a more reliable one.

If you use more technical indicators, you will create a more reliable system, which generates less trading signals. On the other hand, if less technical indicators are used, a less reliable system will be created which generates more trading opportunities.

Several technical methods

Several technical methods are suggested below, which you could use in your strategy.

  • Fibonacci retracement, curves and fans which appear in hourly or daily charts
  • Supports or resistances which appear on every timeframe
  • Key price levels identified on hourly and minutely charts
  • Price chart patterns which appear on every timeframe

The below picture shows a typical analysis in three different timeframes

Finding entry and exit points

The key to find valid entry points is to find a signal that all indicators agree on. Signals on every timeframe should verify the strategy. There are several bull and bear entry points:

Bull entry points

  • Ascending trendlines or channels
  • Bull candlestick
  • Positive divergence in RSI indicator, stochastic indicator or MACD
  • A strong close support and a weak far resistance

Bear entry points

  • Bear candlestick
  • Descending trendlines or channels
  • Negative divergence in RSI indicator, stochastic indicator or MACD
  • A strong close resistance and a weak far support

It is also a good practice to specify exit points (place stop loss or take profit), before opening a position. The entry and exit points shall be placed in key price levels in the market, and be changed only if the overall trading conditions change. You could place your exit points:

  • Right before resisting or supporting zones
  • On key Fibonacci levels (retracement levels)
  • On main trendlines or main channels

Let’s analyze separate charts by combining several technical indicators to specify the entry and exit points. Make sure that your trading idea is supported in all three timeframes.

In the above figure, it is illustrated that a lot of indicators are confirming each other. The bear head and shoulders pattern, MACD, Fibonacci resistance and the downward crossover of 10 period EMA. You can also see that the Fibonacci levels are suggesting a reliable exit point. This trade seems to be valid for 50 pips and will be completed withing 2 days.

In the above figure, we could see that several indicators are suggesting a long-term position. We have a bullish engulfing pattern, Fibonacci support and a supporting zone in the 100 day SMA. Again we see a Fibonacci resistance which is showing a great exit opportunity. This trade is valid for 200 pips within several weeks. Note that we could divide this trade up into smaller trades in shorter timeframes.

Money and risk management in forex

Money management is the success key in every financial market specially forex. Most times, fundamental factors could affect the exchange rates in forex. Therefore, it is important to limit your loss by utilizing stop loss in every trade.

Bottom line

Everyone could make profit in the forex market, but being successful needs patience and strategy. Therefore, it is important to begin with a precise mid-term strategy to avoid high level of risk.

If you are a novice trader, start practicing in Aron Groups broker free demo account. Compete with thousands of traders and put your trading strategies to the test. Once you feel comfortable with your trading style, you could enter the live market and try to make a profit.

Written by: Mohsen Mohseni (Aron Groups).
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