I decided to call this post Forex factory. I got the idea from the famous Forex forum under the same name. It sounds cool and shows exactly what it takes to become a successful Forex trader. You have to undergo a series of processes in the same manner as some product undergoes various stages in a factory until it goes for sale. Those who have attempted to trade stocks, commodities or Forex know that it is not easy to be a profitable trader. Most traders get burnt within two months of their trading. Most of them decide to leave trading and make money or realize themselves in some other way. I remember myself and my first steps in Foreign Exchange market. I repeated the statistics and lost my initial deposit it 2 months. I almost left the thing, but after a few months having seen some repetitive technical structures in the market I decided to study the thing more carefully. After some time I was able to come back to the market by trading trends and swings with a friend of mine and this time we managed to make money, not to lose it. In the post I want to share some of the things that I believe are necessary to become a successful forex trader. I guess that for those who are not new these processes in ‘Forex factory’ will not be new, but for some it will be, so let me start.

Forex factory rule number 1 – understand the basics of the market

Anybody who wants to be a successful Forex trader should understand the fundamental part of Forex. One should know how this market operates, what causes prices to change, have understanding on what kind of orders exist and which type of orders are best at various conditions market can be in, the biggest size of position that one can take without risking to lose too much, best times for trading, closing and leaving open positions and a few more things. I remember my friend opening a real Forex account with one of European Forex brokers. At one time he had usd/jpy pair open and wanted to close it. However, the platform he was using was rather complicated. So, instead of closing the order, he opened another one. My friend did not know how to close his position. Finally he had to phone company’s help desk and after some twenty minutes of talk his order was finally closed. I believe he was lucky that the thing did not happen during some news release. Having one standard lot open with 2 thousand bucks in the deposit and not knowing how to close it could be a fatal mistake at the time when news comes out. So, you can blow off your account just because you do not understand a few basic things about Forex trading.

Forex factory rule number 2 – have a thoroughly tested and profitable trading system

If you want to be a successful Forex trader you must develop or simply get a tested and reliable trading system that could be used long term. I am sure that with time you will be able to develop and use as many trading strategies as you want, but when you start you should master one. I would really advise you to try the system for at least two months and if that is possible try to backtest its’ performance for twelve or twenty four months. If the system is not profitable within that period of time, do not deceive yourself that it will be successful. Just drop it and search for another one. If it is profitable just go ahead and use it trading in small lots until you feel comfortable.

Forex fatory rule number 3 – develop a trading plan

Ask any trader who has been in the market for five or more years and is able to trade profitably and he/she will tell you a well developed trading plan is a must. A plan can remind you about the direction that you take, goals you want to achieve and the way you are going to trade. It must include: frequency of your trades, rules about entering and exiting the market, what market conditions should be present in order for you to execute a trade. It should also remind you how you are going to solve complicated situations in trading; let’s say when the market starts going against you. It must also remind you how you should behave when you have a few bad trades one after another and maybe even a few good trades one after another.

Forex factory rule number 4 – stick to your plan

After developing your plan you should stick to it and follow it with strict discipline. Other things will not work long term if you do not follow the plan that you have made or you make too many exceptions to it. Your trading strategy could be the best in the world, you can have a terrific plan and excellent understanding of fundamentals, but if you do not follow those and start making spontaneous trading decisions you will surely burn your account. Succesful trading does not start with improvisation. It might come later, but if you improvise all the time you will probably become a gambler, not a trader (and a bad one too!). Simply follow your plan blindly and only when you see that something repetitively does not work, then you make adjustments to your plan. Just do not make those adjustments every day for your trading plan will have too many points, which will become too difficult to follow. So, have a plan and keep to it.

Forex factory rule number 5 – learn to control your risk

If you want to stay long in Forex market and finally become a profitable trader, you should also have a risk management system. You should have it outlined in your trading plan, but as it is very important I decided to mention it as a separate point. Your deposit is the tool you work with to make more money. You cannot trade without money. Before you can make money, you should learn how to protect the amount that you have. Read any article on risk management (in trading) and you will always find that the rule of not risking more than two percent of your capital on any given trade. I would say that you should not risk more than one percent when you are starting. As the time goes one you will be able to increase the percentage. In the meantime, learn to manage your risk.

I hope the article was useful. It cannot reflect all the necessary things that one should know as a Forex trader, but I believe it conveys the most important things. You should stick to the points till they become your second nature and the process of trading becomes automated. With time you will develop your own trading style and strategies, but before profits come you will have to undergo a painful learning process. Good luck in staying in Forex factory and becoming a profitable Forex trader.

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Forex factory rule number 1 – understand the basics of the market

Forex factory rule number 2 – have a thoroughly tested and profitable trading system

Forex fatory rule number 3 – develop a trading plan

Forex factory rule number 4 – stick to your plan

Forex factory rule number 5 – learn to control your risk

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