5 Things You Need to Know Before Becoming a Trader

Countless stories exist of novice traders who quickly lose their money and give up on trading altogether. While trading, like any other business, carries inherent risks and rewards, many aspiring traders succumb within a short period, often believing that trading is an unattainable goal.

Fundamentally, the mistakes made by beginners stem from a superficial understanding of forex trading. I believe that many individuals who initially enter the world of trading are solely drawn to the potential profits and fail to consider the associated risks. They often receive information solely highlighting the positive aspects of forex trading, creating a skewed perception of the market.

This one-sided view leads to the misconception that trading is easy. Consequently, many traders dive in without adequate preparation, only to experience a series of losses and eventually give up.

For those who are new to trading, it's crucial to understand aspects beyond the potential profits, ease, flexibility, and other perceived benefits of forex trading.

1. There Are No Quick Wins in Trading

One of the biggest myths in trading is the existence of a "get-rich-quick" scheme. Many novice traders fall into the illusion that they can become wealthy overnight through forex trading. In reality, like any other profession, success in trading requires time, dedication, and consistent learning.

Forex trading is not a gamble; it's a skill that must be honed. You need to understand various market aspects, from technical analysis to fundamentals. Additionally, you must develop strong emotional discipline to cope with market fluctuations. These skills cannot be acquired overnight.

Successful traders have typically spent years learning, including experiencing failures and losses. They continually learn from their mistakes, refine their strategies, and adapt to changing market conditions. So, if you intend to enter the world of forex trading, be prepared for a long journey, not a short sprint to wealth.

2. Profits Are Directly Related to Capital

We often hear stories of traders turning $100 into $10,000 in a short time. While not impossible, such scenarios are rare and usually involve extremely high risks.

In reality, profits in forex trading are generally proportional to the capital invested. This means that the larger your capital, the greater your potential profits. However, it also implies a higher risk.

As a beginner, it's crucial to start with an amount you can afford to lose. Avoid borrowing money or using your emergency funds for trading. Begin with a small amount and focus on learning and developing your strategy. Over time, as you become more skilled and consistent, you can gradually increase your capital.

3. The Market Does Not Move According to Our Wishes

One of the most important concepts for every trader to understand is that the market has its own dynamics. The forex market is influenced by various complex factors, ranging from global economic policies to market sentiment, which can often be difficult to predict.

As a trader, your job is not to try to control the market but to learn to "read" it and adapt to it. Too often, novice traders fall into the trap of thinking they can "beat" the market or impose their will on price movements.

A wiser approach is to develop flexibility in your trading strategy. Learn to recognize different market conditions – uptrends, downtrends, or sideways markets – and how to best navigate each. Remember that sometimes, the best decision is not to trade at all.

4. Predictions Are Expectations, Not Facts

In the world of forex trading, predictions play a significant role. Traders use various analytical tools, both technical and fundamental, to try to forecast future price movements. However, it's important to remember that all predictions, no matter how sophisticated the methodology, are essentially expectations, not facts.

The forex market is highly dynamic and can change in seconds due to various unexpected factors. Even the most experienced analysts can be wrong in their predictions. Therefore, a prudent trader never bases their trading decisions solely on predictions.

Instead, focus on sound risk management. Use stop-loss orders to limit potential losses. Diversify your strategies so that you're not overly reliant on one type of prediction or analysis. And most importantly, be prepared to admit when your prediction is wrong and exit losing positions.

5. The Dilemma Between Strategy Completeness and Consistency

In their quest for the "perfect" trading strategy, many traders become caught in the dilemma between completeness and consistency. A highly comprehensive strategy that attempts to account for every possible market scenario often becomes too complex to implement consistently. On the other hand, a very simple and consistent strategy may not be comprehensive enough to handle various market conditions.

The key is your goal for trading, which is to generate consistent profits. A good trading strategy doesn't need to be comprehensive to handle every possible market scenario; it needs to be consistently executable. Because, in principle, to get the same result, you need to do it the same way consistently. If the method changes, the result will change as well.

Additionally, although your strategy may be simple, you must fully understand it. This includes not only the procedures for executing it but also its performance. Because the primary requirement for generating profits in trading is to use a profitable strategy. This means you need to backtest your strategy to see if it performed well in the past. If it didn't perform well in the past, it's unreasonable to expect it to perform better in the future.

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The five points above represent the other half of the information about the reality of the forex market, which is usually unknown to beginners or aspiring traders. By understanding these points, you can better prepare for your journey as a trader, building a stronger foundation based on a realistic perspective of forex trading.

Of course, this doesn't mean that after thorough preparation, you will automatically succeed. Because fundamentally, trading is a long journey where success is measured by your ability to persevere through various market dynamics.

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