We all aspire to earn big, and the forex market is one place to test our fortunes. But that doesn’t mean we gamble our money without a planned strategy. We must learn the market basics and build our strategies and risk management plan. In forex trading, stakes are generally very high. The market has all the strength to wipe all your invested money in the blink of an eye. Have you heard of the term “Forex God.” I am sure you must have heard it while trading in the market. Who exactly is a “Forex God?”
Let me be straight with you. The term may spark our imagination as we envision a “Forex God.” It can be very subjective and can be different in reality.
In this article, I will take you on a journey of inspiration dealing with some hardcore facts. I will debunk some myths surrounding forex trading. We will witness some real-life stories and try to grasp how they come to the top of their game.
Always remember: There is no secret mantra to becoming a successful forex trader. Keep following the basics to Learn, be Adaptable, and gain Experience. Along with this, always have a Risk Management plan.
Understanding the Forex Trading
A trader trades in the forex market to profit by buying and selling currency pairs. The basic foundation to understand the market should be solid to be at the top of your game. Although there are many other aspects one successful trader must cover while trading in the market. Before going all too technical, let me share some tempting facts with you.
The forex market is liquid and very volatile. It is easy to execute a frequent trade. A staggering over $6 trillion is the daily turnover of the market. “If this much amount is traded daily, many traders must earn a fortune daily. “Give it a thought. Let me paint a brighter picture: “You will be the one.” Just keep following the basic rules to trade in the forex market we have already mentioned.
Timing of Forex Market
- One of the most critical aspects that make the forex market tempting is its accessibility. A trader can access the market 24 hours, five days a week. This means a trader can capitalize on market moves at any time of day and can make a fortune by applying their strategies.
- The market relies on geopolitical news, economic indicators and other macroeconomic factors. A trader must update and monitor these macroeconomic factors daily. They can interfere with market moves and price fluctuations.
Tools Used by Forex Traders
- A successful forex trader learns a lot. They evaluate every market dimension before moving. This involves risk management. At any point of trading, you can experience a risk that can affect your investment.
- We are fortunate that we have many risk management tools nowadays. A trader uses them in such a way that it can minimise the risk. Stop-loss, investing in multiple trades, diversifying the risk, and evaluating the risk-reward ratio are a few.
What is a Forex God?
“God” is a very subjective term. What might be true to me can be an absurd statement for you. I am not here to be a part of that debate; you are also not. Let us understand this regarding the forex market and try to mix some divine aspects.
“Forex god” can be a general term that may correspond to a person who has mastered the art of earning by trading in forex. Is it even possible?
Yes, if you are a trader with in-depth market knowledge and a grasp of technical and fundamentals. Along you must have a sense of discipline. Have control over emotions and a knack for identifying opportunities to trade. All these traits will make you a formidable Forex trader, and you will become a “Forex God.”
A successful forex trader should also be flexible in his approach and a quick learner. Their brain should be like a sponge, which is always ready to suck knowledge. Flexibility does not mean the ability to change everything that you plan. But, to play around with what all you have and be able to extract profit out of it.
Example of a Well-Executed Forex Trade
Theories can be tedious, so let me show you a perfect trading example.
1. Event Brexit Vote and GBP/USD Trade (A Geopolitical Event)
The development has opened a trade window to work on the sentiments created by a geopolitical event. In 2016, the United Kingdom held a referendum on whether to stay or exit the European Union. It led to voting; market sentiments were high, as it would be a close finish.
2. Trader’s Analysis
Traders kept a close eye on the political developments in the UK.
With the help of technical and fundamental analysis. Analysts predict that if “Leave” won, the GBP would take a nosedive against the USD. Analysts expect this to happen due to economic uncertainty and potential market turmoil.
3. Execution: The Trade
- On the day before the vote. Traders opened short positions on GBP/USD. Expecting a fall of the Pound against the Dollar.
- It was necessary to set stop-loss. This is to manage potential risk in case of a surprising event of “Remain.”
4. Outcome
- The referendum result came in favour of Brexit. The currency pair of GBP/USD took a nosedive from $1.50 to $1.32 within a few hours.
- The traders close the short position. They have earned a considerable profit with this sharp decline.
5. Factors that Helped
Time Analysis: The traders predicted this event based on a geopolitical event and market fundamentals.
Risk Management: Traders have marked a stop-loss in case the vote and the market go the opposite.
Note: GBP/USD experienced a drop of over 10%, which was one of the biggest in recent forex history.
Myths and Realities in the Forex Market
On the one hand, we are discussing the concept of “Forex God” and still emphasizing a watchful trade. Traders may find it delusional at times. The image of being a “Forex God” can foster trading myths, making it difficult to understand.
Myth 1: Successful Traders Have a “Secret” Formula
Reality: One of the most common myths. This myth will fade away once you get some trading experience. Mark my words: “A successful trader has to build a solid strategy, risk management, and discipline. They develop these with years of practice and tasting some losses. If you keep doing things in planned ways, someday you will succeed.
Myth 2: You Need to Spend All Day Watching the Market
Reality: Successful traders form long-term strategies in the market. It requires no frequent screen time. In a long-term plan, a trader has predefined entry and exit points. Successful traders rely on strategy and discipline rather than frequent monitoring.
Myth 3: It is All About Luck
Reality: For some days, luck can play a role. If you want to be a successful forex trader, I will never rely on it. Successful traders rely on technical analysis, fundamental analysis, strategy, risk management, and discipline.
Myth 4: Complex Strategy = Good Strategy
Reality: It is a fact that the simple strategy often outperforms the complex ones. Sometimes, over-strategizing can make us vulnerable and exposed to threats, as we are bound to make mistakes. Successful traders use a straightforward system rather than a complex one.
Myth 5: You Can Earn Huge in Shot Period
Reality: A successful forex trader must follow the 3Ps, which are patience, practice, and performance. Your performance will be the basis for your trade history. It will also show your skill in managing risk and making a profit. It all takes time. You cannot be a one-hit wonder.
Myth 6: Either you Should be a Genius or Have a Financial Background
Reality: Another common myth. Successful traders come from all backgrounds. Financial knowledge may help, but it requires something more. The things that can make you a successful trader are your willingness to learn, adapt, manage risk, and have emotional control.
3 Real Life Stories of Successful Forex Traders
This can be the most inspiring section of this article. Let us draw some inspiration from some real-life stories of successful forex traders.
1. George Soros: The Man Who Broke the Bank of England
The Legacy: George Soros is hands down one of the most famous currency traders in forex history. He made a renowned trade in 1992, making $1 billion in a single day.
The Trade: Traded against the British Pound. He anticipated that the United Kingdom had to devalue the pound or leave the European ERM, also known as the Exchange Rate Mechanism.
2. Bill Lipschutz
The Legacy: Known as the “Sultan of Currencies.” Bill started his trading journey in 1980 at Salomon Brothers.
The Trade: Converted a $12,000 inheritance into millions. He had a brilliant risk management technique. Believed that success in a trade may come from understanding the psychology of the market rather than simple analysis.
3. Paul Tudor Jones
The Legacy: Made famous by the 1987 stock market crash. He was a hedge fund manager known for macro trading strategies, including forex.
The trade: In 1987, the stock and forex market crash was known as “Black Monday.” He hedged his position and made a significant profit. He emphasized understanding market cycles.
Conclusion
I started this blog by making you understand the “Forex God.” You must have understood by now that it is not a mythical figure. The keys are a learning attitude, discipline, and emotional control. Also, use risk management techniques. This can make you a successful Forex trader or a “Forex God.
Frequently Asked Questions
It can be true in some situations. A trade can generate money through the forex trade, but it must consider several factors.
1. High volatility and liquidity.
2. Effective use of leverage.
3. Requirement of skills and knowledge.
4. Emotional control
5. Applying risk management techniques.
The Forex trading market has always been an attractive financial market for traders. There are many benefits of forex, and three of them are.
High Liquidity: It is one of the largest financial trading markets in the world. Investors trade $6 trillion daily. High liquidity ensures that there are always active buyers and sellers.
Market Accessibility: It is a decentralized and 24-hour, 5-day accessible market.
Leverage: Forex brokers avail high leverage. It allows traders to control prominent positions with a small amount as well.
The chart shows a triangle formation as the price range fluctuates in a narrow range over time. It shows a brief interval of time between indecision and consolidation. The price will break in either direction. These types of patterns are easy to identify and are popular among traders.
The 5-3-1 strategy can benefit beginners in the forex market. Sometimes, traders might get overwhelmed by so many options of currency pairs and 24-hour market accessibility. The strategy focuses on:
1. Five currency pairs to trade and learn.
2. Three strategies to master and trade.