If you have been toying with the idea of beginning to trade forex, then let 2023 be the year that you finally turn the dream into a reality. Building a successful forex trading career takes time and commitment but it’s certainly possible with the right preparation. Here are the steps you need to take to kick start your Forex trading journey in 2023.

Whether you want to supplement your income with part time trading, or launch a full time trading career, forex is a potentially lucrative and rewarding way to boost your finances.  With low barriers to entry and fantastic opportunities for leverage, anyone can access the liquid forex markets within a short time frame. Here’s how.

Educate yourself

The more you understand about the world of forex trading before you begin the stronger your position will be. The concept is simple: it’s the exchange of one currency for another. Sometimes this is carried out simply for reasons of international trade or travel, but professional forex traders carry out transactions with the aim of making a profit.

There is no centralised forex exchange, meaning that anyone with a computer connection can carry out an electronic over the counter transaction. Trading takes place across all time zones in the major world cities such as London, New York, Paris, Tokyo and Zurich.

Therefore the markets are open almost 24/7, so even if you work 9-5, you can still make trades at peak times, such as when the UK markets open at 8am.

Until the early 1970s, most currencies were pegged to the value of the US dollar, which in turn was pegged to the value of gold. This arrangement was known as the Bretton Woods Agreement, and it was designed to create a stable environment for international trade to grow and flourish.

By 1973, the amount of gold available was no longer enough to support the rapidly emerging world economies, and the Bretton Woods Agreement was abolished. Since then most world currencies have floated freely in the markets, subject to the pressures of supply and demand.

This created ideal conditions for forex trading because profits could be made by carefully tracking the upturns and downturns in the market, and buying or selling currency pairs at the right time. At first, only commercial and investment banks had access to the markets, but the internet has changed all this.

Now, anyone can learn how to make profits from changes in the exchange rate and taking advantage of the interest rate differential between two currencies.

To learn more about the tools of the trade such as leverage, price movements, pips, and bid spreads, there are plenty of online tutorials, courses, e-books, podcasts, and more. It may seem complex and overwhelming at first but once you have mastered the basic concepts learning about forex trading is really not at all difficult.

Create a risk management strategy

When you are comfortable with your level of knowledge the next step is to but a solid risk management strategy in place. This will prevent you from trading more than you can afford to lose, which is a common mistake for novice traders to make. The main two issues to consider are your own level of personal finance and your attitude to risk.

While there are great opportunities to make profitable trades, there is also the risk of making damaging losses if you are not careful with how much capital you risk per trade. You do not want to compromise your ability to pay for life’s essentials by failing to manage your trades properly.

As a general rule, novice traders should begin cautiously, risking no more than 1% of their capital per trade. It is also important to use stop loss orders to protect yourself from making potentially major losses. A stop loss order automatically triggers an instruction to sell a currency pair at the market price once a specific price is reached.

This prevents you from uncontrolled losses during episodes of market volatility. As you become a more experienced trader, you will be able to refine your method of setting stop loss orders by using in-depth technical analysis. This will ensure that you are not missing out on profits by being overly cautious, or leaving yourself vulnerable to substantial losses.

Define your trading strategy

Everyone has their own strengths and weaknesses and you can use these to decide which trading strategy will suit you best. It may be a process of trial and error before you land on a particular strategy that works for you. Even experienced professional traders tweak and refine their strategy from time to time.

Common trading strategies include day trading, where trades are opened and closed within one day. Beginners often start out with this method, because it avoids the risk of large overnight swings in the market. Positional trading involves waiting for much longer periods of weeks or months to take advantage of long term market trends.

Which approach you adopt may depend on how long you have to devote to your trading each day or each week and what your current level of technical knowledge is. It may also depend on your individual personality. For example, day trading requires a high level of concentration, sharp reactions, and the ability to remain calm under pressure.

If you are patient and disciplined, and dislike having to make quick decisions, then long-term trading might be the best approach for you.

Set up a demo account

So you’ve read up on forex trading, you’ve got a plan and you know how to manage risk. The next step is to set up a brokerage account. Before you plunge into live trading, it’s highly advisable to start with a demo account. This allows you to test out your strategy without risking any real money.

You might be tempted to skip this step if you are keen to get stuck into the real thing after weeks of preparation, but it can be a big mistake. Even experienced traders use a demo account before working with a new strategy or platform. This helps to highlight any flaws in a plan, and allows for the necessary adjustments to be made before any harm is done.

As a newbie it will also allow you a way of getting to know your way around the trading console. You certainly don’t want to make any errors in your live trading because you couldn’t find a certain feature or you pressed the wrong button.

Trading involves making fast decisions under pressure, and practicing with a demo account is a great way to get used to this experience. Even the most cool-headed person can be prone to making the wrong call when the stakes are high, so it’s well worth using your demo account for at least two or three months to help develop your trading mindset.

Establish a trading routine

Anyone who has achieved any level of professional success will tell you that they succeeded with a little bit of talent, a lot of hard work, and the discipline of sticking to a routine. This is true of sports stars, singers, doctors, and definitely forex traders.

Traders may have an image of being octane-fuelled thrill seekers, but the truth is that successful traders are well organised and never act spontaneously. They will keep a list of all the daily tasks that they need to accomplish, and work their way through them. This helps them maintain accurate records of their trading decisions.

Following a routine will mean that checking the economic calendar and studying the current economic conditions will happen at the same time each day, and you will never be caught out by a sudden period of volatility in the markets. You will also have the chance to identify the best trading opportunities for the next few hours.

Work on your emotional discipline

As someone prepared to take on the challenge of forex trading, you will already be no stranger to mental discipline. However, forex trading can be an emotional rollercoaster that takes even the most stoical personalities by surprise. It’s helpful to read up on the basics of trading psychology to help you understand the hidden pitfalls that trading can bring.

Professional forex traders put a lot of work into learning how to make objective decisions, which are based on logical analysis rather than a subjective ‘gut instinct.’ This is because most of the time, gut reactions are based on raw but powerful emotions such as fear and greed. We are all subject to them no matter how tough we think we are!

This is especially true when it comes to the prospect of losing or making a lot of money. As human beings, we have evolved over centuries to fear losses and pursue wealth, because it was a basic survival strategy. However the emotions are a dangerous tool when it comes to forex trading.

It is not possible or healthy to suppress your emotions completely, but you should train yourself not to act on your first instincts, but to step back and take a cool logical look at a situation. This takes practice but it certainly pays off. 

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