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That’s a question many people ask when they first start out looking to get into the Forex market. When you’re first starting out it can be a daunting task to figure out how making money with Forex works. But I’m going to simply it for you and tell you the 4 things that you need to know: Capital, trading strategy, time and discipline. That’s how forex works.

Having a Trading Capital to be a Successful Forex Trader

The first you need to consider is how much trading capital you will have for your forex trading account. Most brokers offer crazy leverage for you as a forex trader. So at first glance you might think that you don’t need to have a large amount of starting capital. You couldn’t be more wrong.

If you start small, you’re bound to take more risks because you think that you need to make x amount of dollars. Whatever reason you might have behind trading forex, you most likely want to make money. If you start with a $1,000 account it’ll be very difficult to make a living off of the gains from that $1,000 account. Even if you make $1,000 a month, can you really live off of that? You might need double or triple that, but realistically do you think you can have 100-300% return on a monthly basis. Very unlikely.

You have to be realistic about your returns. A mutual fund manager that returns 10% annually is seen as a god. Obviously, it depends on the type of fund the mutual fund manager is in but even if you’re trying to get a 2% return a month, that’s 24% a year. Not too many fund managers out there can promise (actually they usually don’t promise anything) that kind of return.

So even if you were trying to get 2% a month, to have $2,000 in income a month you’d need a $100,000 capital to make that happen. Does that sound feasible to you? You tell me, but that’s how forex works.

Having a Sound trading Strategy to Make Money in Forex

Some people call this a trading system. In order to make money in forex, you have to have a trading strategy that will work time and time again. You need to be able to consistently make gains from your trading system in order to make money and that isn’t done too easily unless you have found a system that will simply work.

Where you find a trading strategy is whole another article but it’s very important that spend some quality time finding and backtesting one when you find it. Not every trading strategy will work for everyone and you’re not going to find a great one on a trading forum or be able to buy one for $9.99. You’ll most likely develop some sort of trading strategy or trading system on your own. But either way get on it!

Why you need Time to Make Money in Forex

Time is very important because you’re going to need a lot of it. You’re not going to become a successful trader overnight, it’s going to take a lot of time. You need time to do research, develop a trading strategy like we just talked about, and more time to trade. It isn’t impossible to trade part time or as a side income, but realize that you’re up against institutional traders that have all the tools, the capital, and are being paid the big bucks to be trading against you and hopefully take your money. So make sure you’re willing to put in ample time to trade forex. That’s just how forex works.

How Discipline Makes a Life of a Difference in Trading Forex

I’ve already talked about discipline in another article at howforexworks.org so definitely read up on that to get more information. Simple put, you need discipline to stay on track and focus on what’s important. You’re going to have bad streaks and maybe even develop bad habits. But if you’re disciplined, you’ll be able to deal with all of that unscathed.

Typing it all together

Capital, strategy, time, and discipline. Those are the four elements of a successful forex trader. Wherever you stand now, you need to really find out where you are in those elements. Always strive to better yourself and focus on making the effort to improve each every one of those. That’s the only way you’re going to be a successful trader. Trading forex is not easy, it’s not a get rich scheme by any regard do be sure to focus on doing everything so that you give yourself the best chance.