Things You Didn’t Know
About Successful Forex Traders
1. They
Don't 'Lose'
Most
starting out in the Forex market view a loss as a bad thing. It’s a way of
signaling that they did something wrong.
And doing
something wrong is bad. At least that’s what we’ve come to believe over the
course of our lives.
However, the
successful trader doesn’t view a loss as a “bad” thing.
It’s also
not something the market did to you. The Forex market doesn’t know where you
entered or where your stop-loss order is located.
Unlike you,
the market is always neutral. So when you lose, it’s a matter of reflecting on
what you could have done better.
2. They Use
Price Action
This doesn’t
mean they’re using price action in the same way I use it, but they are using
some form of price action as part of their forex trading strategy.
Whether a
trader is using raw price action or simply using it to identify key levels in
the market, price action plays a major role in any strategy.
That’s
because it serves as a representation of the psychology within a market. It
gives us some insight into the minds of other traders.
Having some
idea of where buy and sell orders are located in the market is critical to
becoming a successful Forex trader. It can strengthen any trading strategy by
providing areas to watch for potential entries as well as profit targets.
Trading
Forex without using some form of price action is like trying to drive a car
with one eye closed. It can be done, but I wouldn’t recommend it.
So even if
you are developing a strategy based on indicators, it would behoove you to
learn about price action. If nothing else, it will provide a solid foundation
from which you can design and develop other strategies.
3. They Have
a Defined Trading Edge
I see a lot
of talk on the internet about the need for a trader to develop an edge and
define it. And, if I’m honest, most of what I’ve read out there is pretty
alarming.
It’s little
wonder why so many traders struggle to understand what an edge is and how they
can develop one of their own.
So what
exactly is a trading edge and why is it important?
An edge is
everything about the way you trade that can help put the odds in your favor.
It’s a
combination of the time frame you trade, the price action forex strategies you
use, the key levels you’ve identified, your risk to reward ratio, and other
factors. It even includes your pre- and post-trading routine.
How do you
handle losses? What do you do when you win? These are all things that make up
your trading edge.
Think about
it like this…
What allowed
Brazil to win so many World Cups in soccer (football to most of the world)?
Was it the
passing? Maybe the shooting?
It was
everything. Brazil had the “total package”, as they say. It was their passing,
shooting, dribbling, movement of the ball, set plays and everything in between
that gave them an edge over other teams.
Your trading
is no different.
Although
there are dozens of factors that make up your edge, you don’t have to master
all of them at once. Nor do you have to master all of them to start putting the
odds in your favor.
It’s better
to master one set of factors and then slowly expand to others to further define
your edge. Not only is this a natural progression, it’s the preferred way to
learn.
Have you
heard the saying, “jack of all trades, master of none”?
If you try
to master too many of these factors at once, you’re setting yourself up to
become good (not great) at a lot of things. That isn’t what we want.
Instead,
master one thing at a time. For example, become an expert at identifying key
levels. Then expand your skill set by learning how to determine trend strength.
After that, set your focus on learning about pin bars.
Those three
things are all you need to witness a rise in your profit curve. Continue to
expand your skill set in this manner and soon you will have a trading edge of
your own.
The key is
to only tackle one or two factors (at most) at a time. Using a slow and steady
approach will get you on the road to becoming a forex success stories for
trader in no time.
4. They
Don't Try Too Hard
This might
apply to other ventures in life, but Forex is the exception. Successful Forex
traders know that trying too hard is a sign that something isn’t right.
This is
different from studying hard. As a new trader to Forex, studying the market is
highly recommended.
For
instance, you can’t spend too much time learning the ins and outs of the
various currency pairs, or how to draw key levels. The harder you try to learn
those particular topics, the better.
However,
trying to make a trading strategy work will only lead to destructive behavior,
such as emotional trading. Similarly, trying too hard to find trading
opportunities is a good way to lose money on subpar setups.
Jack
Schwager, the author of the Market Wizards series, said it best when he wrote,
“good trading should be effortless”.
I’m a big
fan of this book series. In fact, I wrote a post that features several of his
books.
When I first
started trading Forex, I remember spending countless hours studying setups over
the weekend. I would often come back to my trading desk multiple times on
Saturdays and Sundays.
Then on
Monday, more often than not I would end up taking a completely different trade
setup only to watch the original trade idea move in the intended direction
without me.
Does that
sound familiar?
It happened
because I was trying too hard. As soon as I stopped over-analyzing trade setups
and trying to make them work, my profit curve started to rise.
Now I spend
maybe 20 to 30 minutes per day looking at my charts—the exception being the
charts I post on this website, of course.
As
counterintuitive as it may seem, learning to not try so hard was one of the
things that completely changed my trading career for the better.
Forex broker for Successful
Forex traders have taken note of this, which is why they let the market do the
heavy lifting for them.
5. They
Think in Terms of Risk
The concept
of thinking in terms of money risked, as it applies to Forex trading, is no
exception. It’s an extremely simple concept that can have a huge impact on your
journey to becoming a successful trader.
I’ve never
met a successful Forex trader who doesn’t calculate their risk before putting
on a position.
You may
think that’s an obvious statement, but a surprising number of traders don’t
think about how much money is at risk before opening a trade.
This is
because they’re using an arbitrary percentage to economic calendar risk, such
as one or two percent of their trading account balance.
Think about
your last trade for a moment. Did you define the exact dollar amount at risk
before putting on the trade? Or were you more focused on the number of pips and
the percentage of your account at risk?
The
convenience of Forex position size calculators has made it so that we never
have to consider the dollar amount being risked. This convenience has caused a
huge oversight.
Don’t get me
wrong, I use the position size calculator at the link above before each and
every trade.
However, I’m
just as interested in the dollar amount at risk as the percentage of my account
balance.
