How to Become a Professional Forex Trader

Professional traders are often presented by the mainstream media and popular culture as wearing sharp suits and ties, carrying a briefcase, always being on their phone, and surrounded by hundreds of monitors.

While there is some truth to that, the reality is that anyone can become a professional trader. You can trade Forex from anywhere: the comfort of your own home, your office, or even on a beach in Thailand!

But to be able to rely on trading forex as your primary source of income, you need to reach the elite ranks of professional forex traders.

After all, retail traders are notorious for losing money rapidly: so how do you rise above the 95% that lose money and join the 5% that are making money?

Table of Contents

Treat forex trading as a real job or business

The first and probably most important concept to grasp on your way to becoming a professional forex trader is to treat it as a job or business.

Just as you would dedicate your time and energy to learning and working at a job, you need to dedicate time and energy to trade the forex market.

Professional trading means being very consistent. For starters, set a time that works for you where you’ll sit at the charts. Since the Forex market is a 24 hour market, you can find what time works best for you.

Is this before you go to work at your day job? Or once you come back? Ideally, it should be at a time where there is decent trading volume. This way, you’ll see good movement in the price charts.

No matter what time you decide, treat it as a job or business and stick to it every single day.

More: Are the Forex markets closed on Thanksgiving?

professional trader

Set realistic goals

The next step on your way to becoming a professional forex trader is to set realistic goals. In all likelihood, you’re not going to become an overnight millionaire.

You can however make a decent living and grow your trading account significantly over the long run.

Trading forex is a learned skill, just like any other. When you start out, you’ll make mistakes, and as you watch the price movements more and more, you’ll be able to better understand price action and develop your trading style.

Your first goal should just be to remain profitable over a given period of time, whether that’s a month, a quarter, or a year.

Don’t worry about the dollar amount just yet: just look at how many pips you can make and how consistently you can make them.

If you can make 200 pips a month, those 200 pips can be $20, $200, $2000, or even $20,000, so focus on being consistent first.

Develop a solid trading plan

The next step is to develop a trading plan and stick to said trading plan.

Your trading plan is an all-encompassing document that shows:

  • Your times for taking trades
  • What currency pairs you’ll trade
  • How to enter a trade(your trading rules)
  • How to set your stop loss
  • How to exit a trade
  • How to manage your losses
  • Money management strategies

One of the biggest differences between amateur traders and Forex professionals is having a plan.

What kind of trading strategies are there?

Fundamental trading

Fundamental trading is when you study the economic fundamentals of two nations and use that information to place a long-term trade.

For example, if you believe that the Eurozone economy is getting stronger and there will be greater demand for Euros as opposed to British Pounds, you could place a sell trade on the EUR/GBP Forex pair(fewer Euros required to buy a Pound means the Euro is stronger).

Discretionary trading

Discretionary trading is when you use technical analysis to form a bias and place trades. Instead of having very fixed rules to place trades, discretionary traders have flexible rules and rely on experience to trade.

Discretionary trading will often yield trades a lot more often, but it also increase your chances of taking high risk trades. Pro traders and experienced investors that have mastered the sychology of Forex trading tend to use discretionary trading.

Mechanical Trading

Mechanical trading is when you have fixed rules to enter trades, and you don’t enter trades until thse market conditions are met. Mechanical trading is a very strict form of technical trading since you only depend on charts, trading tools, and indicators.

This strategy is great for a beginner forex trader since it (ideally) prevents you from taking stupid trades.

Automated trading

Thanks to the increase of computing power and AI, automated trading is also becoming very popular. Automated trading is where a computer algorithm places trades on your behalf. Instead of you needing to sit at your computer all the time, you can develop a strategy and make an algorithm to trade it for you.

There are some highly successful professional forex traders out there who make a lot of money with automated trading.

Trend traders

Trend traders look to capitalize on large, longer term moves in the currency markets. Trends often last for weeks or months, so trend followers try to get in early and ride the trend as far as they can.

When trend followers turn a profit, it’s huge, but there are a lot of small losses along the way.

Find your edge

Of all the trading styles listed above, you need to find out which strategy works for you. A professional trader knows their strengths and weaknesses, so if you want to become a professional forex trader, you need to identify those in yourself and create your plan around them.

Use sound money management strategies

The most important part of forex trading is money and risk management. You can have the best system in the world, but you’ll blow your account in no time if you don’t manage your risk.

A professional forex trader knows that risk management is the way to win in the FX market.

Your money management strategy should be documented in your plan. Risk appetite will vary from person to person, so you need to balance how much money you’re willing to lose vs the profit potential in any given trade.

As a general rule, don’t risk more than 2% of your account balance per trade, and ALWAYS use a stop loss.

In some cases, it is better to risk even less per trade such as 1% or even 0.5%.

Also, shoot for a positive risk to reward ratio. Go for at least 1:1.5, and try for 1:2 or 1:3 as well if the market conditions are conducive.

The higher your risk to reward ratio, the more trades you can lose and still turn a profit.

Don’t let losing trades bring you down

Even professional forex traders have bad days and losses. Losses are a part and parcel of the forex market, so in order to be a forex trader, you need to learn how to take losses in your stride and not let that mess with your psychology.

One of the biggest reasons retail investor accounts are blown so often is because a few losing trades in succession throws newer traders off of their game. Pro traders know how to take losing trades in stride.

The best thing to do when you lose a couple of trades and feel like your game is going off is to walk away from the market and come back to trade another day.

Practice, practice, practice

Trading forex pairs is a skill, and all forex professionals were once beginners. They key to getting good ay anthing is to practice!

Nearly every Forex broker offers a demo account so aspiring forex traders can learn the ropes without risking real money.

In fact, even after you’re a successful trader, you should still have a demo account to practice every now and then.

Join a community and get support

Forex trading is a very lonely line of work, so joining a community of traders can give you really good company as you trade and you’ll have people to talk to about your common line of work.

Often, family members won’t really understand how trading works so you may not be able to talk to them about it. If you can, more power to you!

Many online courses also have extensive communities such as Facebook groups or Zoom groups where you can trade in a social environment with like-minded individuals.

More: how long does it take to learn Forex trading

How much money does a professional forex trader make?

The amount of money a professional forex trader makes depends on the size of their trading account. It’s not unreasonable to expect gains of 4 to 5% per month on a good month, though that can vary depending on your trading strategy.

So if you had a $10,000 account, you could make $500 per month.

With a $100,000 account, you could make $5,000 per month.

With a $1,000,000 account, you could make $50,000 per month.

You have two ways to grow your account, and ideally, you should use both in conjunction.

First, open your own account with whatever money you can afford to put in it(and lose) and start growing it slowly.

This account will grow from profits and from additional funds you deposit into it.

Second, get a funded account with a prop firm. This is a great way to get a large injection of capital. Some prop firms even offer scaling plans to get you trading $1,000,000 or more in one to two years.

Use your funded account to cover your personal expenses AND use some money to grow your own account. Prop firms may not be around forever, so the best way to stay in the game is to have your own account and grow it too.

Which Forex brokers do professionals use?

Professional traders tend to use forex brokers that offer tight spreads, fast order execution, and the trading platforms that they prefer. MetaTrader 4 and 5 are excellent platforms and are supported by most major brokers.

Conclusion

Becoming a professional Forex trader and joining the elite group of profitable forex traders is a long journey. With persistence, perseverence, patience, and a cool head, you can reach financial freedom.