Things Successful Forex Traders Do
In just about any career, or profession, there are a few super achievers who make things look very simple. Regardless of whether it is sports or medicine or even finance, there are some who absolutely hit the ball out of the park when it comes to excelling in their professions.
The forex industry is also no newcomer as there are many professional traders who make it big in the industry and have earned a reputation for themselves as being a professional and a super trader.
The question of whether successful forex traders are born or can be made has been an age old question, and one that was adequately put to rest when Richard Donchian conducted his famous Turtle Trading experiment.
Picking up a random bunch of people and teaching them how to trade a rules based trading strategy, Richard Donchian proved that good and successful traders can be made and don't necessarily need to be born as achievers.
So what is it that sets apart successful forex traders from the rest and are there any trading tips that one can make use of in order to develop one's own trading skills?
In this article we look at five things that successful forex traders do differently and their mindset and approach to trading that can be beneficial for traders at all levels.
Over trading is one of the biggest reasons why most retail traders tend to lose money. Over trading can be done for a number of reasons, starting from the emotional factors such as greed to trading so as not to miss out on any trading opportunities.
One of the things that set apart successful forex traders is patience. Patience is not only the ability to wait for the right entry or for the right trading set up to be formed, but it is also being patient enough for the trade to complete its course.
Most traders often get too hasty and end up cutting their winners too early or leaving their losing positions open for a long period of time without any risk management in place.
It is important for traders to build the right trading mindset and having the right trading psychology plays an important role in determining the success in trading.
Good Risk Management
Successful forex traders ensure that they have a firm grip on their risk management practices. This means being able to know when to cut the losses and accepting the fact that the trader was wrong in their analysis.
Risk management also takes into account the ability to control the position sizes or the number of contracts that can be traded by taking into account the leverage and the trading capital as well as the margin requirements for the asset that is being traded.
Most traders do not pay much attention to the risk management aspect of trading which can prove to be disastrous especially when prices start to move swiftly and against the trading position. Having a good trading account is essential as it can help traders to manage their risks as well as staying in control of their trades.
For most traders, trading is all about buying and selling the currency pair. Successful forex traders spend a lot of time in preparation for the trades. Preparation is key, as it allows traders to build discipline and also helps them to follow a trading plan.
Many successful traders spend a lot of time analyzing the markets in question, which takes the approach of conducting a thorough fundamental analysis as well as looking at the broader markets in question to get some idea of how the markets are turning out.
On the other hand, the general set of traders often come to the table with a very macro view and focus on just the asset or the currency pair that they are trading. In many cases, traders also focus purely on the technical aspects of trading rather than understanding the bigger picture, which lead to big mistakes in the long term trading perspective.
Successful forex traders spend a lot of time practicing how to trade forex. Using a demo account is often frowned upon by some, but in fact a demo or a virtual trading account is an important tool that can help traders to fine tune and understand the nuances of trading.
Many traders use a demo trading account in the initial parts of their trading and use it mostly to practice trading or to understand how forex trading works in the beginning stages. However once a trader gets the hang of the markets or the trading systems, the demo trading account is often abandoned.
Successful forex traders, even those at large prop firms use a demo trading account as it helps them to hone their skills. A demo trading account is also a good remedy for over-trading and can help traders to break out of a losing streak.
While the above factors might seem just a few, one of the biggest aspects that sets aside successful forex traders from the rest if their dedication towards excelling at trading. This means spending many hours at their screens while also learning about the minute details about the markets that are responsible for moving the markets.
In the world of forex, many traders join simply for the reason to make a side income or to get rich quickly. Many traders prefer to take the short cut such as using a black box trading system or a signals service in order to make money trading forex. But the truth is that practice, dedication and perseverance are three things that really set apart the successful forex traders from the rest.
Remember that just as with any profession, success cannot be expected overnight and forex is no exception to the case either. Therefore traders need to pay attention to these factors and have a more realistic expectation before venturing into the world of forex trading.