Ever wonder what makes a successful forex trader tick? What separates the winning traders from the average trader? Research shows that every successful trader possesses these 5 specific characteristics:
1) Be disciplined
3) Treat trading as a business, not a hobby
4) Be Unemotional
5) Set Goals
Read, understand, and emulate them to help you become a more profitable trader.
1) Be Disciplined
Anybody can get lucky and make money in the forex market; however, only the disciplined can make money consistently over time. Being disciplined is by far the most important factor that determines your success. Every professional trader knows that the trading method or strategy does not determine your success. It’s how you follow through on the strategy that matters.
Your trading strategy is your compass and will tell you where to go and how to get there. Do not get lost. Don’t make trades because you “like” a specific currency, or because you “think” that there will be strong run-up in a specific currency. When you start making arbitrary decisions like these, you will get lost and start losing money.
Following your system is always your best option. You must have the discipline to follow your strategy even through a string of losses.
Everybody fails. But not everybody knows how to come back from a failure. Many successful forex traders today began their trading careers by losing their entire bankroll. Millions of people are lured to forex by the promises of easy money, and unfortunately most of us that attempt it lose a great deal of money. So is losing money a pre-requisite for forex success? Of course not.
The majority of people that lose money will never become successful. They become depressed, discouraged, and give up trading immediately. On the other extreme, some people who lose their first 10,000 dollars will borrow another 10,000 dollars and lose it in the exact same way.
Beginners will lose money; that is a fact. But failing to learn from your failures will be your greatest mistake.
Take the opportunity to learn from your mistakes. Did you trade based on emotion? Were you trading based on a tip? Does your strategy fit the current market trends? Did you risk too much money on one trade? Did you misread the charts? Were you impatient? These are the questions you must ask yourself when you fail. But the most important question is this:
Why did I fail?
If you can answer this and learn from it, you will no doubt be on your way to becoming a successful forex trader.
3) Treat trading as a business, not a hobby
Let’s face it, we can’t all quit our day jobs and start trading currency full time. Not yet anyways. Professional forex traders are better traders than most people for the simple reason that they spend at least 40 hours a week either trading forex or researching the forex market.
Trading forex is a business for the pros. If they lose money trading, they will lose their jobs. That’s pretty good motivation to be good at what you do. The same attitude should be adopted even if trading is not your full time job. Treat it as a business and not just a hobby. A hobby is something you do for fun in your spare time. A business is a venture to make money.
I trade forex to make money, not have fun. I have lots of other activities that I can do for fun. I enjoy running, traveling, and watching TV, none of which will make me any money. In fact, most hobbies will cost you money. Trading should not cost you any money, it should make you money.
If you approach you trading as a business, your outlook changes completely. Losing money is not acceptable in a business because if you do it long enough, you will be out of a business. You will take every possible step to stop losing money.
A business will not grow by itself. You must devote time to learn how to become a profitable business. Use your spare time to do some research into the market, read some good books, and attend training seminars. Stop wasting your time on things that cost you money, and start investing your time to learn how to trade properly, which will lead you down the road of financial freedom.
“I’ve always believed that if you put in the work, the results will come. I don’t do things half-heartedly. Because I know if I do, then I can expect half-hearted results.” – Michael Jordan
4) Be Unemotional
If you have ever played poker, you will know the high of going “all in”. Your heart is racing like there’s no tomorrow, and you are hoping and praying that the cards will go your way. It’s the thrill of knowing you can double your money in a few moments and also knowing it can all disappear if things don’t go your way.
This type of excitement should not exist in any form in your trading. If you are a thrill seeker, go skydiving. If you are a gambler, go to a casino. If you are afraid to lose money, open a savings account.
Successful forex traders do not let their emotions interfere with their trading. Too often, we let fear, greed, or pride get in the way.
Fear will prevent you from making the right trades and make you lose out on immense opportunities. Fear stems from lack of knowledge and proper education. You are afraid because you can’t see that a trade is the right trade since you don’t know what the right trade looks like. Once you acquire the knowledge and training, you can begin to trust your decisions because they are based on facts and not emotion.
Greed is another emotion we must overcome to be successful. Many beginners experience “beginners luck”, and come out on top on their first few trades. Then they start believing that they should have traded with more money so their profits will be larger. So on the next trade, they trade with a large sum of money and they lose it all. Logic will dictate that they should trade with a smaller amount the next time around since they have less capital now. Unfortunately, humans are not logical creatures. Our greed takes over, and we start believing that if we put in more money, we will make up for the lost amount, and come out on top. Sadly, this cycle can only continue until you are completely out of money. The worst thing that can happen to a beginner trader is to have a successful first trade.
Pride will take you nowhere fast in forex trading. Pride will prevent you from learning. When you feel like you have nothing left to learn, that is when you will start losing money. Pride is the toughest stumbling block to overcome for some because it is an ingrained part of their personality. However, we can all learn from the hugely successful forex traders who still need to research and read to maintain their success.
You can still be happy when trades go your way, and sad when they don’t. However these emotions should not play any part when making your decision for the next trade. Your decisions must be based on logic and facts, not emotions.
5) Set Goals
Every trader needs goals to keep them on track. It doesn’t really matter what your goals are, but it’s important to write them down. If you don’t write down your goals, you will never know if you have achieved them or not.
Everybody has a different goal when they begin to trade forex. Some people just want to make a few extra bucks on the side trading; some people want to make enough so they can quit their day job. Some people are tired of the 10% average return from the stock market and want to put their money to work for them in forex.
Write these goals down and look at them often so you will know if you are on track to meet your goals or not.
The best way to be successful at trading is to emulate patterns of successful forex traders. Read, re-read and understand these 5 characteristics and apply them to your forex trading career. You will find that you will become more successful when you possess these 5 characteristics.