Whether you are just starting out on your forex journey or you are further down the line, there’s always more to learn. The opportunities to access funded trading accounts have never been wider, thanks to the rise of digital platforms. However, traders who invest in continuous learning and development are the ones most likely to succeed.
In order to qualify for and maintain your access to a funded account, you’ll need to prove that you are a consistently profitable trader over time. This takes more than market knowledge: you will need discipline, emotional awareness, and a well-honed trading mindset. Here’s how to improve your trading skills and maintain that competitive edge.
Start with solid foundational knowledge
Good trading skills are built on solid foundations, so make sure you have mastered the basics. This will give you more confidence when making technical and strategic decisions, and prevent time wasting through looking up unfamiliar terms.
If you are completely new to forex trading, it’s best to start with some background reading so you can understand how the market works and what influences price movements. You should also understand the meaning of key terminology such as pip, spread, leverage, margin and lot size.
There are lots of different ways you can learn the basics of forex without spending too much: checking out the numerous free online courses is a good starting point. Avoid any that make inflated promises, such as earning a million bucks by the end of the year. If you are a complete beginner, this isn’t going to be a realistic goal.
Forex trading skills take time and patience to build up, and there’s no such thing as overnight success. A good training course will be transparent about the risks as well as the potential benefits of forex trading, and teach you about the importance of building a solid trading plan and a good risk management strategy.
Create or refine your trading plan
Once you feel comfortable with your level of knowledge, it’s time to put together a structured trading plan. Diving straight into the markets without a plan is no better than gambling, so this step is non-negotiable. If you already have some experience under your belt, it’s worth reviewing your strategy to see if there is room for improvement.
If you are aspiring to qualify for a funded account with a prop firm, then it’s best to check out their rules when you are developing your strategy. They will usually have clear guidelines about profit targets, maximum drawdowns, risk management and the use of stop loss orders, and so on. Use these as the basis for your plan.
If you are a new trader, don’t overwhelm yourself with an overly complicated strategy: simple and straightforward can work just as well. Be clear about your signals and timeframe for entry and exit criteria, how much you are willing to risk per trade. Position sizing should be adjusted based on your account balance and risk tolerance.
Also consider the time of day you will be making your trades: the forex markets operate almost 24/7, but liquidity is higher at certain times, such as the crossover between the closing of the New York trading day and the opening of the London one.
It may be that you are restricted by having to trade around a full-time job or other commitments, or you just feel sharper and more energetic at certain times of the day. Consider these factors when choosing between currency pairs, and whether to follow a short, medium or long term strategy.
Backtest and forward test your strategy
Before launching your strategy on the live markets, it’s crucial to roadtest it to see how it performs. Backtesting means running your strategy on historical data to see how it would have performed: there are various apps and tools that can allow you to do this.
Forward testing means applying your strategy in simulated live market conditions, such as a demo account. This will allow you to see results in real time. For a true test not just of your strategy, but also about how you perform psychologically in a real trading set up, complete a 14 day free trial with a prop firm.
This will give you access to a leading-edge trading platform so you can familiarise yourself with the dashboard, and the opportunity to trade in live conditions without risking real money. Track your results, but look beyond the number of winning trades. Analyse the risk-to-reward ratios, and the consistency of performance across market conditions.
Keep a trading journal
One of the best ways to take your trading skills to the next level is very simple: keep track of your trades in a journal. This can be digital or paper, but the important point is that it should be more than merely a record of the basic facts. The journal should include the following:
- Entry and exit points
- Your rationale for making the trade
- Your emotional reactions during the trade (this might sound strange if you are a newbie, but we’ll explain in more detail later on)
- The market context (such as economic data, geopolitical events, sentiment—was it a bullish or bearish market?)
- The outcome of the trade and your reflections on how well it went
This might seem to be an unnecessary step of admin when you are keen to get on with planning your next trade, but it is an invaluable learning tool. Having this level of detail at your fingertips helps you to review your past performance and identify patterns in your most and least successful trades.
Over time, you’ll notice what strategies are working best for you and tweak accordingly. It is also important to understand your emotional state when you made the trade, because this can help you to work on weaknesses. For example, many new traders make unwise and impulsive decisions based on fear or greed rather than research and logic.
Get into the habit of journaling every day, even during your free trial, so that it will become an automatic part of your routine when you start live trading.
Decide on your currency specialities
If you are new to forex trading, you’ll be strongly advised to stick to major or minor currency pairs, rather than venture into exotics (currencies from nations with emerging economies). The major currency pairs always include the US dollar combined with a currency from another developed economy, such as the Euro or the British pound.
The minor currency pairs mean those from developed economies that do not include the US dollar. Focus your attention on just one or two pairs to start off with, because each pair has unique characteristics and will behave differently to other currencies. Give yourself time to build up expertise in a narrow range of currencies before exploring new ones.
Decide if you want to trade the news
Trading the news means following economic announcements such as interest rate rises, changes in inflation and unemployment figures. This data can cause sudden sharp shifts in the market, providing opportunities to make profits. However, it requires experience and judgement, and decisions need to be made and executed quickly.
Some prop firms place restrictions on how and when you can trade the news as part of their risk management policy. For example, they may ban trading five minutes before and after high impact news releases.
Even if you decide not to trade the news, knowing when key economic data is released and understanding its impact on your currency pairs will help to improve your trading skills.
Work on your emotional discipline
If you are some way into your forex trading journey and you can’t pinpoint the reasons why your trades are underperforming, it could be because you need to work on your emotional discipline. No matter how thorough your market research and technical analysis, if you are making impulsive decisions you will always sabotage your progress.
Common psychological pitfalls include revenge trading in order to win back losses, or overtrading because you fear missing out or are impatient to boost your profit targets. Traders, just like all humans, can be subject to biased thought processes such as seeking out information that confirms preexisting beliefs rather than making independent decisions.
These psychological factors can be subtle, or at least not obvious to ourselves. The best strategy to remain in control and maintain a strong trading mindset is to stick to a daily routine; always refer back to your trading plan before making any adjustments to your trades; and take a break after a loss rather than try to reverse the damage.
Learn from others, but sift the noise
There are lots of online trading communities, YouTubers and so on where you can learn and pick up tips to improve your trading skills. However, not all of these will add value. Be sceptical of any advice that doesn’t prioritise sound risk management and logical data backed strategies.
Remember, successful forex traders aren’t always the most knowledgeable: they are well balanced and disciplined individuals who are best placed to judge market opportunities.