So many newbie traders fail in the first few months of trading forex, and a big percentage give up and pull out all together.

The sad thing is that many entered the forex trading market with high expectations and invested a lot of money as they dreamt of huge returns.

Their reasons for failure usually revolve around just a few things and I would like to suggest some measures every trader should implement to ensure they earn consistent profits from their forex investments.

1. Practice with a demo account

I cannot over emphasize the need to start with a practice account. This is one of those common sense actions that every expert will give you and so many newbies take for granted.

Most traders will indeed open a demo account and make a few trades with it, but they almost always never take it seriously. What I am suggesting here is not just to make one or two trades.

Please use demo account consistently, daily for not less than three months before risking any of your money on a live account.

Please note that I am talking about consistently and daily. Keep track of your trades just like you would do with a live account. The demo account is there to educate you and give you a feel of what real trading is really like. So treat it just like you would do for a live account.

One more thing, just because after my recommendation of a three-month minimum is over does not mean you now close the demo account.

If you find yourself losing money in your live account, then it is a signal that you did not get enough from the demo account. Stop trading on the live account for a while and go back to demo-trading.

2. Choose your broker carefully

Many problems in the world today would not only be solved, but they would be non-existent if only people took enough time to consider their actions. And this applies much so in forex trading.

Choosing your forex broker is one of the most important steps towards attaining success in trading. Unfortunately, the internet is full of scammers who pose as genuine brokers only to swindle you out of your hard-earned investments.

Apart from fraudsters, there are individuals who genuinely want to act as brokers but simply lack the expertise, experience, and connections to effectively serve traders.

Therefore, you should take adequate time and consider all possible angles when choosing your broker. Some basic things you should check is which country the broker operates from.

You should be generally safe if the broker is operating in your country for it means you have easier access to them and they are under the jurisdiction of the local judicial and law enforcement system.

Another very important thing to check is whether the broker is registered by a regulatory authority. In the US, trading with a broker registered by the CFTC or such other body should ease your mind.

You should conduct due diligence and confirm that your broker of choice is experienced and has been in the business successfully for at least three years. Check the background of the owners and managers for any scandals involving fraudulent activities.

Check online forums and reviews on what clients are saying about the broker. The best way to find a good broker is to use one recommended by someone you know personally who has been a successful, full time forex trader for a while.

Click here to read reviews of some of the best brokers in the market.

3. Learn your platform

You may know the best forex trading strategies to follow, and you may have the best broker, but if you don’t know how to effectively use the trading platform you will be continually exposing yourself to risk.

This ties in with my first point, use a demo account. Learn how to read the charts and indicators. Learn how to maneuver around the platform, to make trades, and to exit trades quickly and efficiently. Most importantly, learn how to put effective stop loss orders and take profit orders.

4. Formulate a strategy and stick to it

Right from the time you started practicing on the demo account, you should be working on a great, profit-earning strategy. An effective strategy will ensure that you always have steady profits with minimal risks.

It is not enough to just come up with a strategy, forward test and back test it to make sure it works well. After testing, make sure you stick to it. Do not deviate from your strategy on whims.

5. Practice proper risk management

It does not matter how much profit you make on trades, because if you fail to manage your risks you are going down. One rule I always say to newbies is never risk more than 5% on a single trade.

This ensures that you always have something to fall back on when you make losses and you live to trade another day. Additionally, you should only trade with money you can afford to lose.

6. Trade 4-hour and higher charts

Simple logic will lead you to believe you have more chances of making higher profits if you get the opportunity to trade more. And, the best way to enter more trades is to trade those that last short durations.

On the face of it, this does make sense. However, it is so much harder to trade 5-minute charts than to trade longer-duration charts. This is especially applicable for newbies.

The advice I can give is that you should just enter a single profitable trade. Use long duration charts which are easier to read and predict, and hence are much easier to profit from.

7. Never chase the market

A wise trader is one who plans their trade well in advance according to their trade strategy, then waits for the ideal opportunity and instantly enters the trade without hesitation.

However, most traders find themselves entering into trades just so they can be active in the trade.

They view the time they are out of trade as wasted opportunities without realizing that making losses is worse than wasting opportunities. Make your strategy, then follow it.

Summary

There are many more ways to improve your profitability in trading forex and these are just the tip of the ice-berg. One thing I will mention in quick passing is that as a trader, you should continuously educate yourself.

If you can get some formal education on forex trading, then that’s even better. E-books and forums also offer a good opportunity for self-education.