As i had promised in the previous to discuss the attributes of a successful forex trader. These are the most important of all. It’s as simple as understanding the mechanisms of a predator.
What hurts new traders is that they can not distinguish between facts and opinions and they end up behaving like gamblers in the markets. The forex market is the most efficient financial markets around. Trading takes place 24 hours during weekdays, with a daily turnover of over two trillion dollars per day. A number of economic, political and social events happen to affect the value of currencies.
A trader’s lack of understanding of the market leads to incorrect assumptions and predictions about events and how they will impact the market, a phenomenon known as the gambler’s fallacy. That is why most individuals think trading is gambling just because they lack the understanding of financial market dynamics.
The following are the essentials of forex trading success.
The secret of success in these markets is not to make money fast, but to make it consistently. So you must develop a trading plan that can build up equity over a long term independently of market conditions. It doesn’t matter how long you have been a trader, you are faced with some of the most difficult psychological challenges you will probably ever experience in your life. As a trader, you will forever be fighting with your emotions making sure they stay away from your trading decisions
You have two choices, you can either methodically follow a written plan or fail
The markets are an interesting, stimulating game but they are also emotionally and at times physically challenging. Just like the predator, you have to learn to take the injuries sometimes.
How many people are willing to admit the battle ground isn’t the markets but what’s within you? A plan helps you to fight what’s within you.
Your trading plan must clearly define your entries, exits, market conditions and the amount of money your risking on your trade.
The greatest risk in forex trading lies in trader himself. Discipline is the ability to follow your predetermined rules as written in your trading plan. This protects you from over trading
Only one or two good trades a month are enough. You only trade the high probability setups.You have to focus like a sniper so that it is worth the short not a machine gunner who shoots at anything.This is your hard earned money at stake so you cant just enter any trade.
It is one of the hardest attribute to exhibit but just like a predator you must develop patience.
All you need to do is to sit and wait for your setups.The setup to take will just show it self according to your set trading plan. You sit and watch, the one to be eaten will bring itself.
Risk and money management.
This is the hardest of all to master. Never risk more than 5% of your account on any trade. This explains why some traders never make any profits or break even while trading. They make $100 this week and lose $200 the next week. This is simply because they have not mastered the risk reward ratios. No single strategy has 100% success rate. Therefore you need a strategy that gives you a chance to recover from losses not just protect you from losses.You MUST only take setups that have a risk: reward ratio of atleast 1:2. I usually encourage my fellow traders and my students to take setups that atleast give them 3 times what they are risking. So you must wait for the high probability setups.
Like any other business, you must track and measure your progress. A Trading journal is a record of the your trades and the reason for taking the trades. You can not improve what you can’t measure. It helps you to identify mistakes hence improving your trading.
So have got to BE(Develop attributes) before you can DO(Trade) and do before you can HAVE(Profits).
It is not easy, but its very possible.