- October 2014
- Posted By Ninoslav
- 3 Comments
Trading forex is not an easy endeavour. It takes practice, patience, preparation and performance consistency in order to be carried out successfully. There are, however, some habits that the most successful of Forex traders never fail to keep. Whether they’re trading, planning or recuperating losses, successful traders have these 5 things in common.
Discipline in trading is vital to the trade success. Whether successful traders are following a strategy or trying out a new one, persistence in this endeavour is pivotal. Some traders make a mistake of valuing their strategies on ‘per-trade’ bases where one losing trade will result in the strategy being discarded. Of course, there is no fool-proof trading strategy out there, as Markets run independent, so sticking to strategic trading is something successful traders habitually do. Discipline doesn’t just mean ability to stick to a strategy, however, through every trade. One of the most common temptations for traders is moving the stop-loss position away from the market when the trade gets too close to it. This can increase the risk of a larger loss, and as such, successful traders practice unwavering discipline.
2) Risk Management
Possibly the most important characteristic of a successful Forex Trader is protecting their capital. Trading forex is risky, so proper risk management is about the most important aspect any trader can learn to do. Successful traders know that high leverage can bring high returns, but equally, can bring very high losses.Therefore, they do not take such huge risks.Trading forex is not, by any means, a get-rich-quick scheme, so protecting the capital is vital. Not losing more than necessary or even the entire capital is what separates successful traders from the rest. Successful and consistent use of stop-loss is not just desired, but mandatory for long and profitable trading.
3) Keeping control of emotions
Even the most successful traders have bad trades. There is no such thing as a perfect trading record and understanding this maybe the key in controlling the emotions. Successful traders do not panic when the market runs against them,nor do they get overly confident when they have consecutive successful and profitable trades. Overconfidence and panic are not the only emotions that hinders traders, positive emotion such as ‘hope’ is also one of them. Hoping that the market will eventually go in their favour or that something might change suddenly, is and can be just as damaging to traders. Successful traders look at and understand the market as something to work with, rather than gamble against. They habitually separate their emotions from their trading, which aids them in conducting well though-out trades, understand the risks and know when to leave and enter the trade.
4) Cut losses
Although it sounds pretty simple and straight forward, implementing this tactic or even making it a habit isn’t as simple. Cutting the losses comes down to emotions, discipline and risk management. What separates successful traders from the rest, is the ability to take minimal losses without losing control or ‘gambling’. If the market is going against the best of the best (and this does happen), they do not believe that if they leave the trade going ‘’just a bit more’’ it will turn around and they’ll recuperate losses. The chances are, the account will incur massive losses, most of which were unnecessary.
5) Knowing that Market is always right
Market is essentially, unpredictable. Successful traders do not take ‘’vengeance’’ against the market, nor do they underestimate it. Many novice traders tend to try to get any losses back instantly by opening large positions or ignoring the market and hoping for the best. More often than not, this ends in disastrous results for the trader.Because Forex market is decentralised, nobody controls it, it is not aware of an existence of any single trader and more importantly, market is never wrong. The only thing that can be wrong, are traders and their evaluation.
Being a successful trader requires consistency and this consistency is gained through development of good trading habits, forex education and discipline. Staunch discipline and developing of good practices into habits is what ultimately separates top 5% from the other 95%.
By Milyana Miljkovic at Orbex