Financial freedom means different things to different people. To some, it’s about buying what you want when you want it. To others, financial freedom may be simply being rich enough to have no debts.
For Ambrose Ebuka, an expert forex trader and analyst, financial freedom is having enough passive income to cover living expenses. It is not about being rich and having a lot of money but having enough to take care of your expenses so that you can live on your terms and spend your time doing what you like.
In the initial stages of every successful trader’s trading journey, they will experience some difficulty. It’s like a baby learning to walk. First, you take baby steps, stumble and fall a good number of times, but you get back up and continue forward. This time, It requires a lot of time and effort and experienced people to guide you along the way.
Here are some trading tips to steer you in the right direction as you embark on your trading journey;
Get Education: In order to be successful in any field or business, you must have adequate knowledge of how it works. This applies to trading as well. The importance of forex education can never be downplayed. If you don’t dedicate time to learning how to navigate the markets, it is very unlikely that you will become a successful trader. Also, you should understand that learning never stops regardless of your trading experience. The market is always evolving so there is always more to learn.
Develop a trading strategy/plan: Many Forex traders set themselves up for failure when they rush into forex trading without having a strategy. A trading strategy is a plan that combines setups and confirmations that tells you when to buy or sell. Without a strategy, you’ll end up trading blindly. When creating your strategy, you will decide on a set of rules to follow when trading and how you will implement these rules. These are questions you can ask yourself when creating a trading plan.
● What are your trading goals?
● What’s your risk appetite?
● What’s your preferred trading style?
● What determines your entries and exits?
● How much time will you spend trading daily?
Your trading plan also tells you when to take breaks from trading. A famous wise saying that applies to forex trading just as it applies to life tells more: “if you fail to plan, you plan to fail”.
Choose the right broker: Brokers play an important role for forex traders. They serve as the intermediary between the trader and the market. Here are some things to look out for when choosing a broker.
● Variety of trading assets
● Tight spreads
● Client fund security
● Excellent customer service
● Educational resources etc.
Start small: As a beginner trader, don’t be quick to jump straight in with a big lot size, but start with small position sizes and grow your confidence from there, and take your time while at it. Learn gradually from each step you take and don’t increase your lot sizes until you feel comfortable doing so. Remember, Forex it's not a sprint but a marathon!
Losses are integral: Losses are an integral part of trading. Even the most successful traders lose some trades. As a beginner trader, you need to accept that you are not going to profit from every single trade, especially at the beginning. The sooner you accept this, the better. Negative trades are unavoidable consequences of the learning process. Don’t let lost trades influence your next trade, or else you would be forced to revenge trade, and that almost never turns out good. Instead, when you lose a trade, analyse your mistakes and try to learn from them.
Have a trading journal: Having a trading journal is an excellent way for all traders to improve their trading strategies and develop their skills. A trading journal records your past performance, including profitable and losing trades. This will help you identify what was done right and, more importantly, what was done wrongly. Analysing your trading will help you grow as a trader.
Use proper risk management: Risk management is all about identifying trading risks and implementing risk management strategies to limit your risk exposure. Some risk management strategies include.
● Conservative use of lot size.
● Use of stop-loss orders; this is an instruction to your broker to automatically close a trade once the price hits a certain level. When properly used, if the market moves against you, your loss is kept to a minimum and the chance that you will lose your entire capital on a bad trade is reduced.
● Use a moderate risk-to-reward ratio.
● Only risk a small portion of your overall capital on one trade. (1% - 3%)
Understand traders’ psychology: Traders’ psychology is basically the way successful traders think. It’s important to approach the market with clear-sightedness and a practical mindset. Traders will always face difficulties like fear, greed, emotional trading etc. And understanding how a successful trader thinks will help overcome these difficulties. This includes patience, discipline, and consistency, amongst others. Traders’ psychology isn’t entirely easy, but it makes the difference between a successful trader and an unsuccessful one.
Use a demo account: A demo account is a perfect place for traders to practice trading skills and strategies before implementing them on a live account. Demo trading involves practising in real-time and real market conditions, but all profits cannot be withdrawn, and all losses would not financially affect the trader. OctaFX offers a risk-free demo account for traders to practise strategies and get familiar with the trading tools before going to a live account.
Hard work and consistency are required to become successful with trading. It’s important that you identify your set targets and be determined to achieve them before you start trading. Also, keep in mind that it would not be a smooth ride, but the goal should be your motivation.
These are the tips from Ambrose Ebuka, a successful forex trader and Educator teaching over 300+ students offline and providing education, trade ideas and chart analysis to over 5,000+ students online.