Many professional forex traders take years to master the currency markets and become profitable long-term. Whist it is certainly the case that time and commitment are two very necessary elements to successful forex trading, there are also a number of helpful habits which newer traders can pick-up to avoid some of the losses that many traders experience. Despite the fact that forex trading is both highly popular and highly rewarding for those who trade correctly, it can also be highly frustrating with as many as 90% of traders unable to be consistently profitable. With such a high percentage struggling to make this “10% club”, getting the right advice before beginning to trade with real funds.

Choosing the correct broker

There are a very large number of forex brokers offering great deals to encourage new traders to open an account. Many of these provide a range of different incentives from cash bonuses to high-leverage and low initial deposits.  For many new traders looking to have a longer-term forex career, it is well worth considering which broker is going to work in these interests. This will mean looking for a broker that provides a demo account to allow new traders to practice their skills before parting with real money. It may also mean that those brokers offering a good education package and low-stakes trading will be preferable to those which simply lure in new traders with a big sign-up bonus and allow positions to be over-leveraged.

In terms of leverage, the ability to trade currency of a value far higher than the initial deposit (and the gains that come with this) is one of the main attractions of the forex markets to new traders. However, over-leverage is also one of the principal reasons why so many forex traders fail to consistently be profitable. With the high potential returns that leverage offers, also comes high potential losses and for those developing a trading strategy this can wipe out a trading account in only a few unsuccessful trades. The ability to trade lower risk initially, will be the most beneficial to new traders who should look beyond the temptation to over-leverage their positions looking for big gains.

Develop a disciplined trading strategy

The choice of broker is an important first step on the path to trading success, and the second step it to apply a fully-researched trading strategy to each and every trade. With the temptations to trade impulsively in live markets being so great, it is essential that traders follow their carefully made plan for consistent profits. Discipline is absolutely essential and practising using a demo trading account on live markets is one of the most effective ways to ensure that a trading strategy rules can be followed precisely when real money is involved.

Within any good trading strategy, the focus on how to minimise losses should take precedent even over when to take profits. All professional traders agree that risk management is as crucial to success as the ability to close a profitable trade. Brokers provide tools such as stop-loss orders to assist with this management and these should be applied to all trades to help prevent against large losses when markets turn volatile. Stop losses also allow traders to execute their trading strategy to cut losing trades without becoming emotionally involved and act as an objective referee on every trading decision.

Give up chasing losses

All traders will experience losing trades. There is no way of getting away from this fact and even the greatest traders experience losses which are initially disappointing. However, all good trading strategies will have been designed to include these losses and therefore traders should not feel the need to chase these. The psychological effects of a losing a forex trade can initially be difficult to deal with although, if the risk to reward ratio of the strategy is configured correctly, traders can still be profitable even with a majority of trades being considered as losers.

A key ingredient to long term success is not to chase losses, for example by increasing the next trade size, but to realise that over time a trading strategy has an edge over the market which will make it profitable. Choosing to employ strict stop losses, as well as limiting trade size to a maximum of 3% of the total trading account, will provide a solid basis for forex traders to be consistently successful.