Forex trading is one of the most profitable online businesses ever known. Interestingly however, most people tend to balk at the idea of venturing into the business because they think losing all your investment is inevitable.
While there’s no beating around the fact that many Nigerians have lost heavily in forex trading, the truth is, there are also many others who are making five to six figures in dollars monthly from the business.
As with any other business, forex trading involves some degree of risk. In fact, even expert traders do lose minimally on occasions. To become successful, especially as a Nigerian forex trader, you simply need to minimize your losses to the barest minimum by following these five golden rules.
1. Practice extensively with a demo account
The saying that practice makes perfect runs true for forex trading. Before you dip your feet into the waters of real-money forex trading, take some time to sharpen your skills with a demo account. Virtually all forex trading platforms offer free demo accounts to potential traders, so take advantage of that.
While an impressive performance on a demo account doesn’t guarantee a successful run with a real-market account, downplaying the benefits of a demo account is a sure recipe for failure.
Aside helping to hone your skills as a beginner, a demo account can also come in handy each time you need to experiment with new trading strategies as an experienced trader.
2. Have a trading plan
If you’ve ever listened to “The Gambler by Kenny Rogers”, then you’d sure be familiar with these lines: “You’ve got to know when to hold ’em. Know when to fold ’em. Know when to walk away. And know when to run…”
Although those rules in Rogers’ song were meant for gambling, they are perfectly applicable to forex trading, too. And that’s where your trading plan comes in.
Your trading plan is a written set of rules that determine when you enter the market, how much you invest, when you sell for profit, and when you exit the market to minimize your losses. Taking a few training courses for foreign trading can teach you what you need to know in order to put a plan together for yourself, or give you the opportunity to speak to a consultant about it if you still find yourself lost. After developing your plan, test it out with a demo account before taking it into the real market. And more importantly, once you’ve developed a good plan, always stick with it.
3. Choose a good broker
Your success as a forex broker hinges significantly on your choice of forex broker. While it’s very tempting to go with the first broker to flash an attractive ad banner in your face or send you a compelling email pitch, it’s not always a good idea. There are several brokers out there, and the only way to make the right choice is to properly do your due diligence.
Your ideal forex broker is not just popular, but also reputable, licensed, and well regulated. In addition, be sure that they offer a consistently tight spread. Alpari is one of the most widely recommended forex brokers that meet all these criteria.
4. Risk only what you can afford to lose
We’ve heard stories of people who start nursing suicide ideas after losing heavily at forex trading. Yes, it can be that traumatic for those who trade without thinking or without understanding the rules of the game. It makes zero sense to invest your kid’s college tuition or your retirement savings in forex trading.
So, you should only invest what you can afford to lose. With that, you’d be able to trade with your mind at rest, and you’d be able to trust your strategy and stick with your plans.
5. Try different strategies
They say you don’t change a winning strategy. But as a forex trader, you shouldn’t depend too heavily on a single strategy because the market changes like quicksand, and your so-called winning strategy can start failing at any time.
Now, you don’t have to change a strategy that is delivering impressive results, but a smart trader would continue to test new strategies and ideas by the side — using a demo account. By doing this, you’ll have other strategies to fall back on when your present winning strategy fails.
While there are many factors that influence your success as a forex trader, playing strictly these five rules can help you to establish a viable, profitable, and scalable forex trading business.