Understanding Successful Forex Trading

Best Forex Trader

There are a number of key skills that you might already have or will need to acquire to be the best forex trader. The good news is that these can be learned but some of them require dedication to acquire. There is no doubt that all successful traders will display these characteristics, so it is really worth you taking some time to master these skills.

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The first one is FOCUS. You need to be dedicated to become the best forex trader and able to operate your trading system without being distracted. You may already be experiencing how easy it is to lose concentration and get sidetracked by things that don’t really matter (at this moment).

Common examples are answering emails, phone calls, watching TV, daydreaming, reading the newspaper and just allowing yourself to do anything but the task in hand. This problem happens in many areas of life, not just trading – we look for something else to do because our mind is wandering.

To learn how to become a trader you have to have a plan. You must create a task list that breaks down your trading activity into easily achievable chunks of work. The size of these chunks of work will depend on your ability to complete them within time. When you have this list – DO NOT STOP until your task for that session is complete.

Closely aligned with you focus comes the next skill – you need to have a DISCIPLINED APPROACH. What this means is that you are able to control first your mental state and also your financial state.

Controlling your mental state means that you are able to handle the highs and lows of trading. Your winning trades can make you ecstatic and your losing trades can make you depressed. You have to see your results as a learning experience – nothing more, nothing less. Ask yourself what you learned after each trade then apply that knowledge to your next trade. This way you build up a cycle of continuous improvement and will find yourself gaining both experience and knowledge much more quickly.

A common mistake after a losing trade is to very quickly place another one in the attempt to get that lost money back. This is often from an emotional state of vengeance and is doomed to failure. With a disciplined approach you will step back, think and apply your learning in a constructive way. I guarantee this will actually make you feel better in the long run.

The next discipline to be applied is to your finances. If you don’t manage your money nobody else will. This means being totally responsible for your wins and losses and applying your risk/reward strategy and position sizing ruthlessly. Adopt the approach of a ruthless warrior and don’t allow yourself to step outside your trading plan.

Successful forex trading is also about managing your RESOURCES. This includes your technology and your financial resources. With technology it is all about ensuring you have the right platforms, accounts and analytics in place and you have a back up plan if any of those fail. You may be thinking at this stage that this is taking things too far but even a simple thing like losing your Internet connection for a while can have a devastating affect on your live trades.

Imagine this: you have three big money trades in play and you are watching them all to find the right exit points. Suddenly you lose your Internet connection and you have no way of controlling those trades. If the market turns against you it might wipe out all the benefit you had and turn winning positions into losing ones.

Your financial resources is the pot of money you have to trade with. This is your total trading fund not just the amount you are placing on each trade – there is a big difference. You should have a total trading fund that reflects the seriousness of your business. This will also dictate the amount of only you can place on each trade. We mentioned position sizing earlier on and that is a key factor in managing your financial resource.

What position sizing helps you do is place the correct value against each trade so you don’t blow your trading fund on a series of losing trades. You should not be placing more than 3% of your total fund on any one trade. There are exceptions and at the end of a really good trading week with a number of good winning trades you may want to increase that number as you will have already made your target for the week.

The next key area for you to master is DECISION MAKING. Many people can have a problem with this – they agonise for hours over wether they should do one thing or another and end up doing nothing. Decision making is all about making the best choice with the information you have at that point in time. To help decision making you should remember that it is important to be able to accept the consequences of that decision. Good forex trading advice means you can be happy about the results you get. Also think back to the continuous improvement concept where all of your trades build your knowledge and experience.

This brings us on to KNOWLEDGE. This is pretty obvious really – you don’t want to wander aimlessly around in a subject feeling lost. The key is to pick up the right amount of knowledge in the areas that will benefit you most. Forex is a very wide subject and you can’t be an expert in all aspects. You will soon find a niche in forex that really interests you. It might be a particular currency pair or trading session. Perhaps it’s day trading or technical analysis.  Find your area of interest and become an expert in that. There is no substitute for good training and there are a large number of good courses available using all the main learning formats.

Finally, it’s worth talking about PERSEVERANCE. The reason most people never make a good return on their investments when they have most of the other key skills in place is they just give up. They have a couple of bad experiences and that is it for them. Or sometimes there are difficulties that they just can’t seem to get over. It’s no different in forex trading that another area of life. When you come up against hard times you have to believe that things will get better. Don’t let the little things get in the way of the big prize.

A great way to ensure that you will keep going even in the toughest of times is to make sure you have a strong vision of where you want to be. Make sure you know why you are doing this and keep reminding yourself that you will get there. Often people’s belief starts to disappear when confronted by challenges or negative feedback. They will believe it can work for other people but it just can’t work for them. Once you get over that mindset you can accomplish anything.

So when you look at the characteristics of the successful trader you will see they have all of the ones listed here. To become the best forex trader you must be honest with yourself – identify the areas where you need to add the skill and then be focused enough to work on that area.

Best Forex Trader

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