When you invest you take a chance, so how do you increase your profit as a forex trader?
Whether you trade forex as a professional or as a part-time trader, building a viable and sustainable profit can be incredibly challenging.
This is borne out by the statistics, with a staggering 70% of forex traders reporting losses on a consistent basis over time.
But how can you avoid this scenario, and ultimately increase your profitability as a trader over time? Let’s find out!
What is trading?
There’s often a distinction made between trading and investing, with the former preoccupied with achieving short-term profitability while the latter focuses on traditional, ‘buy-and-hold’ strategies.
Synonymous with the forex market and trading international currency pairs on the foreign exchange, the concept of trading typically see you analyse specific markets and target small but incremental profits from real-time price fluctuations.
Because of this, trading is considered to be the vehicle of choice for novice, part-time and retail investors, particularly as it often eschews ownership of the underlying asset and allows individuals to generate a profit through mere speculation.
How to increase your profit as a forex trader
Even with these points in mind, the question that remains is how can you actively look to optimise and increase your profit margin as a forex trader? Here are some tips to help you on your way!
#1. Build experience before you scale: This is a universal rule that’s pertinent to all types of trading, as experience enables you to learn more about the forex market’s mechanisms and learn from the failures that you encounter as part of your journey. Make no mistake; experience enables you to scale your efforts organically over time, while you can aid this process by keeping a trade journal and identifying either positive or negative patterns that need to be addressed going forward.
#2. Use trading platforms to your advantage: While you alone must take responsibility for your success or failure as a forex trader, many investors live or die by their choice of forex trading platforms. For example, intuitive and powerful platforms such as the MetaTrader 5 allow for far greater real-time and historic market analysis, enabling more informed decision making that can increase profit incrementally over time.
#3. Consider copybook trading: Social or copy trading has become increasingly popular through the digital age, enabling novice retail traders to follow successful and like-minded traders before replicating their strategies over time. With the right research and due diligence, as well as a willingness to utilise your own understanding and make tweaks where necessary, you can improve your trading approach and increase profits markedly in the process.
#4. Recognise the importance of currency pairs: On a final note, you should also utilise platform demo accounts to experiment with different currency pairs as part of your wider trading strategy. As a beginner, we’d recommend starting out by trading just one or two major currency pairs, before scaling and diversifying your portfolio in line with experience and individual successes.