Last updated on January 28th, 2023 at 01:45 pm
There are four main reasons why you can never become rich by trading Forex. This article explains each of the four reasons and provides a solution on what to do to beat the odds and make a residual income from Forex trading.
Table of Contents
4 Reasons Why You Can Never Become Rich by Trading Forex
- Inadequate Trading Capital
Forex trading, just like any other business, requires an investment. Think about opening a boutique with inadequate funds. Do you think the business will run well without challenges? If you said no, what makes you think that Forex business is different from other types of businesses that you want to build an empire from nothing?
Every business requires working capital to reach its goals. If you cannot afford trading capital, please do not consider becoming a trader. Otherwise, you will lose the little amount you have.
- Get Rich Quick Mentality
Most people who join Forex trading for the first time believe they can get rich quickly by trading forex without training and experience. The newbies join the business feeling excited, but their excitement disappears a few weeks later.
If the Forex market could make people rich quickly, we would have millionaires across every street in the neighborhoods.
This is a very common factor that ensures a trader does not become rich by trading Forex. A lazy trader does not want to go through the hardships that successful traders went through. Instead, they want to follow the shortcuts by searching for signal providers, using huge lot sizes to double their trading accounts, trading on a live account using a trading strategy they have not tested, etc.
- Desire to Fit In
As one of the best Forex content creators,OpWell Forex has established that most new traders desire to be seen ahead of other traders even before making any considerate profits from the forex market. They are always attempting to prove to the public, especially on social media, that they are making a kill in forex.
This is suicidal because the desire to fit in comes with the pressure to achieve results that only experienced traders can achieve.
4 Steps Every Trader Must Take to Become Rich by Trading Forex
1. Gain Knowledge
Building a residual income in Forex trading starts with learning. Because most Forex trading courses are self-paced, how long it should take you to gain the knowledge depends on the efforts you commit to learning.
After finishing the theories, the next step is to open a demo account with a broker. A Forex broker provides traders free virtual money to test their trading strategies. Pick a trading strategy, adjust it according to your preferences, and trade with it until you are sure it can bring in profits consistently.
But it would be best if you always remembered that your emotions are not in check when you are trading with virtual money. Emotions are always triggered when a trader opens positions on a live account. So, be wise. Do not spend too much time practicing with free money. Go live once you can determine that the strategy you have been testing can give reliable returns.
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Warning: Stick to your trading system if it’s working efficiently. Do not keep looking for another. Else, you will fall into aCircle of Doom(a circle of doom involves searching for a strategy, practicing with it, incurring losses, abandoning the strategy, and then beginning to search for another one again). The circle of doom is typically caused by failing to backtest and forward test on a demo account.
3. Go Live
Open a real forex account and deposit at least $100 for practicing live. Many Brokers allow traders to deposit as low as $5 but do not fall for that trap. Practice with the $100 account balance until you are sure that you can control your emotions no matter what results from your trades.
Do not target insane results. If you can achieve a minimum of 5% of your capital per month, chances are you will be making more than $5 every month with the $100 capital. But that depends on your level of discipline.
Return on Investment Magic Calculator
Once you have gained confidence in trading on a live account, adjust your trading capital gradually to increase your profits. Here is an illustration of how much you may earn if your target is 5% per month:
$100 = $5
$1000 = $50
$10,000 = $500
$100,000 = $5,000
$1,000,000 = $50,000
$10,000,000 = $500,000
$100,000,000 = $5,000,000
The above figures illustrate how much you may earn per month if you set a target of at least 5%. The actual result may be less or more.
Now that you have a live account, you need a software that can help you monitor your account performance. Create an account at Forex Factory, then generate a trade explorer. The explorer will provide you with statistics such as the worst-performing currency pairs, the currency pairs that give you the best returns, etc.
4. Keep Learning
If you spend enough time to earn, practice on a demo account then start trading on a real forex account, you have now graduated to the intermediate level. Rejoice because you are no longer a beginner. Join a community of expert forex traders and learn from them.
Even though you may be able to make consistent returns, you still need mentorship because there are a lot of things you will need someone to explain to you in your trading journey. If there is an area where the phrase ‘learning never stops’ fits better, then it is forex trading.
The knowledge you will receive in a forex trading community group will save you countless hours of research and hundreds of dollars you can part with if you hire a private mentor.
I hope now you understand what to avoid and what to do to become rich by trading Forex. Suppose you want to make money in forex but you cannot raise enough capital, try growing a small account. But you have to be disciplined. Other successfulforex traders in Kenya have done it, and I believe you can do it too.
Once you have enough capital, everything will be moving swiftly because you will no longer be driven by a desire to double or triple your account balance “in one day”.
We will discuss the Best Time to Trade Forex in Kenya in the next article. Let me know if you have any questions or concerns in the comment box below.
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