Part 1 – How To Become a Pro Forex Trader: Building the Foundation
Building a Foundation for your Forex Trading Career
This week, I am starting a 4-part blog series on “How to Become a Professional Forex Trader”. It will be laid out in a step-by-step easy-to-follow manner. However, before we get started I must issue a note of caution; simply reading this 4-part series alone is not going to make you a pro trader. You have to actually use the information provided within this series and understand that there is no “quick-fix” to trading the market for a living.
Becoming a pro trader is going to take time and effort on your behalf, and you will probably experience some ups and downs along the way. However, you should not be discouraged, because the sooner you accept this reality, the sooner you can get on the path to becoming a professional currency trader. Now, let’s get cracking…
Step 1: Be honest with yourself
First off, let me clarify something; becoming a professional trader is the result of first being a consistently successful trader and building up your trading account and trading skills over time. Thus, your aim as you begin your Forex trading journey should be to FIRST become a consistently successful Forex trader, but that does not necessarily mean you will become a “professional” or full-time trader right away. As I mentioned in the opening paragraph, becoming a pro trader is probably going to take a good deal of time if you are starting from a small trading account, but that does not mean you can’t make consistent money each month in the meantime.
Consistently successful trading and professional trading might sound like the same thing, but they are not. Your aim should first be set on making consistent money each month relative to your account size, not on becoming a pro trader right out of the gate.
You see, if you have a $1,000 trading account for example, you will not be able to make enough money each month to live off of, and if you try to trade your $1,000 account like it’s a bigger account, you’ll end up blowing it out.
So, if you eventually want to be a full-time professional Forex trader, you have to first aim a little bit lower; you need to aim to make consistent money each month while simultaneously implementing effective Forex money management. This is called being honest with yourself about what is really possible given your current financial situation, and many traders simply don’t do this.
You need to think about your trading in terms of dollars risked vs. dollars gained, not in terms of “how much money do I need to make to quit my job and buy a Ferrari”, which is how most beginning traders think. Pretend that you are trading a 1 million dollar account even if your account is only 1 thousand dollars. If you can consistently average a 3R reward each month (meaning a reward of 3 times your overall risk) then that means you are making 3 x 12 = 36R per year. Now, if your per-trade risk on a $1,000 account is $25, that would be $25 x 36 = $900 in a year, or a 90% yearly return; a very very good performance by any professional’s standards. Now, take that 36R and imagine you are trading a $100,000 account; it would equal $90,000 over a year if you risked $2,500 per trade. The return would be $900,000 on a million dollar account if you risked $25,000 per trade.
Do you see my point here? Sure, $900 a year might not seem like a life-changing amount of money, but what you need to understand is that if you are consistently making 36R per year on a $1,000 account for example, the exact same processes and thinking that resulted in that $900 and 90% return WOULD result in a life-changing amount on a $100,000 account. So, the point is that focusing on the actual process and mechanics of trading is far more important than trying to make a lot of money on a small account. If you are pulling a number like 36R or even 15 or 20R a year, you will have no problem finding funding for your account or getting a job with a prop trading firm.
Before you begin learning how to trade or before you open a demo account, you need to sit down with a pen and paper and make a monthly budget. You need to list all the expenses you have each month and then subtract them from your monthly after-tax income, if you have any 100% disposable income left over then it’s OK to use that money to trade with. If you find you don’t have any disposable income left over each month, you’re better off saving your money or finding a different job until you are able to make some money to trade with.
The reason why I am telling you this is because most traders never do this; instead they end up trading with money they really should not be trading with, and also because if you truly trade with only 100% disposable income you will significantly reduce the potential of becoming emotional on any one trade. So, if you really think you have what it takes to become a Forex trader, and you are going to be honest with yourself about what is possible given the amount of starting disposable income you have, then it’s time to move on to the next step of learning the basics of Forex trading…
Step 2: Learn the basics of Forex trading
Next, if you have fully accepted that you need to focus on the process of trading rather than the money, and you know you aren’t going to get rich quick on a small trading account, you should focus on actually learning to trade.
Now, it might seem obvious that you should learn the basics first, but most beginning Forex traders simply have no clue what they are doing as they learn to trade. Many of them ignore the basics of Forex trading and of learning how to trade; this is a big mistake because if you really want to become a professional at something you have to start by understanding and building a foundation on the introductory concepts. You should first get a solid education in the foundational concepts of Forex by taking my free beginners Forex course. After you have done this and you thoroughly understand what the Forex market is, why it exists, and how to make sense of it, then you should move on to learning a real-world trading strategy like price action.
I can assure you that if you take this one extra step of learning the basics before you start buying trading systems and strategies, it will save you a lot of frustration, time and money, as well as put you far ahead of most beginning traders who simply dive-in head first without first building a solid foundation to trade off of.
Step 3: Learning to trade with an effective strategy
After you have completed steps 1 and 2, it’s time to learn some real-world trading strategies and really start getting into the “meat” of Forex trading. Now, there are thousands of different ways to trade the market out there, but if you want to learn how to read the raw and natural price dynamics of a market, I suggest you learn to trade forex price action strategies. By making price action trading your primary trading strategy, you will develop chart-reading skills that will last a lifetime and make any other strategy or system you use even more effective. As you probably know by now, I am a huge proponent of “pure” price action trading, and I really feel that it’s the best way to trade the Forex market.
The price action strategies and methods that I trade with and teach my students have served me well for many years now, and it’s because there is nothing complicated about them. I simply use my ability to read and interpret the overall market structure to find high-probability price action setups, and I watch for these obvious price action setups forming at key chart levels. Thus, there is no confusion or uncleanliness to my trading approach; it’s all about taking advantage of high-probability price action events in the market and knowing how to make sense of and read the ever-changing market conditions.
In Part 2 of this mini series (click here) – I am going to share with you guys the importance of testing your trading strategy as well as how to track your progress and develop a trading plan. These next steps are critical in refining your trading approach and developing an organized and structured trading routine that will guide you when you switch to real money trading and help you avoid becoming an emotional trader. If you want to learn more about my price action trading strategies after finishing steps 1 and 2 in today’s article, check out my Forex price action trading course and members’ community.
62 Comments Leave a Comment
Thanks for article!
I am off to part 2.
Thank you Niall, very good education.
Thank you for sharing your knowledge, experience and writing this blog. I am a member since Jan 13 and I can say that progressed a lot with your course, videos and forums.
I (we, as my friend become a member too now) and came out with our trading strategy and now doing back testing and we see positive results.
We are trying to overcome fear of losing and trying to be consistent in following our strategy and I thinking we are getting there.
Very useful article for novice 4X traders.
Very nice material. Thanks a lot and have a wonderful weekend.
i should have read this when i started to trade ……great insight!
Good lesson. Price action is the best way to trade especially if it involves knowing when the market is going to move based on an understanding of key market elements.
you are spot on nial……if you factor in the compounding aspect even a 3R reward every year adds up to a lot over only 10 years…nice one man…..cheers
thank you.everything you have said is for real true.i am anxiously waiting for the next chapter.
Your article with regard to the price as well as the subject matter of risk involved it. How to identify the trend to what extent it will reach either down or up trends, these are previously calculable it, then go on its treading methodology. Really nice article. I am very happy to see it.
great article Nial, it always inspire me when i feel down in my trading…..
This article is very educative and entertaining.keep it up!
Nial you are so so right about getting our trading strategy right is more important than worrying how much we can make… now i am trading on a smaller lot to improvise my trading method.
Your explanations are so easy to read and understand. I find your advice useful and it makes sense to me. I look forward to seeing trading results after applying your course material.
Your price action stratergies sound great. I’m placing my faith in you.Happy Easter want to be traders.Brian.
Hi Nial- Good stuff,keep it up.
Thank Nial This is an eye opener.I hope to be a pro trader in 2 years max.
you are outstanding teacher,I really approciate what you are doing for us,I haven’t started trading yet,but am learning more from you before I start.you’ve made aware that is good to focus,persistance,dedication will make as achieve our success in trading,and we shouldn’t give up when the ups and downs come.I also understand that patience is our a virtue.thank you.
Great article.Indeed the process is more important than the result.Traders really need to understand the concept here.Forex Trading is a business!
Yeah, dont focus on the money, dont even focus on wins and losses… focus on sticking to your trade plan! If you can honestly say you stuck strictly to the rules of your trade plan then you have put yourself in the shoes of a professional trader and have dramatically improved your chances of success. Just try it as see the results for yourself. If you are new to trading and are on a demo account then you have nothing to loose and the sooner you develop good trading habits the sooner you will achieve success!
Nice one.. This topic is very educative..
I love the part where he says ”By making price action trading your primary trading strategy, you will develop chart-reading skills that will last a lifetime and make any other strategy or system you use even more effective.”
Superb article, especially Step 1.
As someone who is only starting the process, it’s particularly important to realise that no-one can become rich overnight without a helluva lot of hard work and study.
It reminds me of some poker buddies of mine who thought they could turn their $100 starting bankroll into a full-time income within 12 months. They went busto quicksmart… :D
It’s refreshing to see someone who makes money from a trading course actually telling potential clients this fact BEFORE they proceed any further. Thanks for your honesty.
Excellent first installment, makes perfect sense to me !!!
Thank you very much Nial, I read almost all your article and it really help me in my trading.
I´m looking forward to your 5 steps :) Thnx !
…:-)) another great lesson and read..:-)…one to treasure and re-read for sure..:-)..and it is sooo true – consistency consistency…it reinforces what Niall said in previouse articles – you need to know your system so well your entries should be automatic WHEN/IF you see your signals to enter and the wins will come…love your website Niall and I re-visit it very often…you dispel delusions of quick/easy money and deal with realities of trading.
very knowledgable article thank u
Thanks for the great stuff Neil. You really help to learn how to trade in profit. Hello from Russia
Excellent article. The major problem for the vast majority of people who are attracted to trading is that they have “heard”, “believe” it is a fast way of making a lot of money. For some it is but most it is not. This mindset makes people take crazy risks that have very little true reward if any. When someone starts out with a few hundred dollars they have no patience to build their account and see it as an uphill struggle. If only they would focus on the trading and not the money then success will follow, like nial points out, once you can show solid consistancy in your trading with whatever profits you have then the money will follow, in the form of other investors. So, their is no need to get stressed about trying to turn your small capital into millions. Just aim to be consistant!
I am waiting for your next part of Learning. Thank you for excellent way of your article.
Let me learn and make money and I will join as permanent member.
Great article, but I don’t get one thing. What do you mean by making 3 times your OVERALL risk? Let’s say I make 6 trades in a month (risk is 100 per trade), lose 3, and win 3 with 3R, that is -300+900=600. So I make 600, but my overall risk is also 600. So that is 1R, but I would say that is still not a bad result, for me anyways. Regards!
Thank you and I am looking forward to part two.
I understand part one and apply it about 75% of the time.
This means there is still room for discipline. This article gives me that incentive to raise that %.
inspiring article……thanks Nial :)
Thanks Nial..a good start
Thank U, Your articles guide me how to trade.
Fabulous, I have forwarded to my sister your email as she wants to start learning. Perfect timing.
I want to learn as well. Thank You, Thomas
Thanks Nial I have traded a few differant stratergies & made some money, but they all stressed me out to the max. Your P/A is so stress free compared to the others. I have been member for 7 months now. I did blow my acc from $2000 to $1400 in 3 months. But no I am slowly getting back on track. Back up to $2100. What I have found is I am trading much less & having more winners. Somtimes I only trade 2 to 3 times a month. Thanks for every thing Nial looking forward to your next lesson
you are indeed helping thanks.God Bless You
I appreciate the wisdom you constantly share with your readers. It motivates me tremendously to become a professional level trader like you!
Hi, Nial, Wonderfull Idea Your Today’s Lesson… Thanks
Thanks for the great article. The foundation, the most important part of every business. Thanks to remind that to start from the beginning is a good step in direction of success.
cheers for this article. some top tips
This article is a must-read for traders, since this article was created by people have a lot of experience. God Bless YOU!
I love the honesty Nial and appreciate you providing your skills/experience with us.
many thanks it really makes sense
Always a pleasure reading your lessons for the week. They really do remind me to stay patient and focused on the objective. BECOMING A SUCCESSFUL TRADER…
Hi NIAL ! Thank you for being so generous, to lead us to the path of becoming,eventually, a successful professional Trader.
THANKS & REGARDS, AMIN
great article nial as always……..and im pleased to say im conforming to this disipline before i jump into forex fully………
thank you for this great article…& i am waiting for next article…thnx
I believe in pure price action tradin. Its very simple and effective. Anybody that aspire to be a pro trader should learn to read and interprete price action. Thanks nial for ur great effort in bringin this knowledge to us.
Good article! Hope to understand strategies more by reading than videos cos I am Deaf and won’t understand what is said in the videos.
Thanks for the article, it is very helpful! Looking foward to the next steps.
thank u so much for all ur educational tips, really, price is the king, and every trading strategy is simply a derivative of price, so it really makes sense to focus on price action formation, not just in the air, but at key levels.trading is not really that difficult, what is difficult about trading is mastering urself and sticking to ur trading plan. any man trading with even a simple 50-50 pure probability strategy will still make more money than a fellow with a sharp edge strategy in his hand,and a sharp edge emotions in his mind!!
Fantastic article, great useful information. Keep it up:)
Very useful article.
Excellent article, once again many thanks.
Look forward to the next one.
Hello Nial, this trading room in the picture looks really very nice and motivating. Is this the place where you analyze and make your orders? Best regards…