21 Signs You Have What It Takes To Be A Forex Trader
Have you ever wondered what it takes to be a trader? Do you think you are pretty clued in to the markets but are just a little unsure if you are ready to hit the live environment? I’ve put together a list of 21 signs that will tell if you have what it takes. How many of these apply to you? If I’ve left any out. please feel free to leave your suggestions in the comments section at the bottom of the article.
1) You are a left-brained thinker
The left hemisphere of the brain rules logical and analytical thinking. Analysis and logic are integral parts of successful trading since they help you decipher what charts are telling you. Additionally, you need to follow a logical thought process when deciding whether or not to execute trades!
2) Analysis ‘does it’ for you
Your idea of an X-Rated title would be ‘Debbie does algorithms.’ You look at charts and your mind is excited, instantly keen to test and prove information. If you are a geek for data and analysis, these are great traits to have as a trader.
3) You are well centred emotionally
An essential quality of anyone that wishes to succeed in trading. Emotional stability is key to maintaining discipline with trading. The most common cause of deviation from a trading plan is an emotional response to a loss or a gain. Overconfidence and fear are both fatal to quality trading plans and strategy. If you are well centred this sets you in good stead for trading. If you're not well centred- explore ways to get that way. Many traders meditate for peace and clarity before trading.
4) You have deeply researched and understand your system/strategy
There are different schools of thought regarding how to go about finding a system and strategy. Some people are more comfortable demo testing a strategy for six months; others are better off trading on a micro account after they've spent a few weeks learning how it works. It is really difficult for a novice to understand how these different things function together. Your best bet is to find a quality mentoring service or join some forex communities and look for free systems. There are several forex sites that offer "free trading systems" where people have already done all the testing that requires an experienced mind and regularly trade that system. You do not need to spend hundreds or thousands on a system.
5) You understand your emotional and mental state.
The end game goal is to be completely in control of your emotions. That is a pretty tall order for anyone. What you can do to help it along is work in emotional controls into your trading plan. Fail three trades? Take a couple days off. Win a big one? Take a day off so your excitement doesn't taint your decision making.
If you are truly in control of your emotions, you have a much better chance of avoiding any account blowout. If, on the other hand you are reactive and impulsive, you risk letting emotion become the driver to your trades rather than your system. You have to be able to accept the inevitable losses that come with working to be a successful trader.
6) You know your tools and your charts inside out
Successful forex trading is a process of constant learning. Once you settle on a strategy and system; you'll want to investigate as many avenues surrounding the contributing factors as possible. The goal is to develop an intimate understanding of why an indicator gives you a particular signal or what the charts are telling you. While it is good to understand a large scope of indicators and tools; not all information is going to be relevant to your strategy.
7) You understand algorithms, at least in what you want them to do
Even if you don’t plan to trade automatically, it is important to know what algorithms do and why. Many traders start in a fully manual environment and evolve to include some form of automation through algorithms, particularly when it comes to signaling or taking advantage of a determined prime market entry or exit position. If you have a good understanding of algorithms you could really create an edge that is unique to you, generating a clear advantage.
8) You take in information and data like a sponge
Some people look at a label or instructions and stare at it for ages until they slowly soak in the very basic information they need. These people can usually be found in the meat aisle of a supermarket on a Monday, slowly working their way to the fresh produce by Tuesday, where the labels become a little easier. Others however, take in information very quickly and retain the data well. If you are the latter, you have a good chance in trading.
There are lots of technical and fundamental analysis required in trading and some styles such as, need quick decisions and action in and out of the market. To trade competently, quickly and assertively you need to be able to take in lots of information, interpret and make decisions on the information sometimes very quickly.
9) You have mastered fear and hesitation
You can still run away from spiders and wasps if you want, we won’t judge on that. But when trading, if you dither and hover over the button constantly, you could be missing perfect entry and exit positions. Trading needs you to be assertive and positive about your trades. Also, a good strategy, tried and tested can help you master hesitation. It can also help you master fear, which can be equally as costly. Fear can make you question your decisions, make you miss trades and generate a deeper problem with reactive emotional trading. You need to master fear, not remove it, but learn to harness and use it to work for you rather than against you. If you can do this, you are well on your way.
10) Your trades in a demo account have been consistent and you win more than you lose
If you have been learning the Forex market in a demo account, taking the market seriously and basing trades on live and current data, then you can take a lot from that environment. If you have just been playing, putting on ridiculous trades and stupendous levels of risk to try and make as much money as possible in as short a time as possible, then don’t expect to trade well in a live platform. You will destroy any financial worth you have achieved. If however, you are taking the demo seriously, trading successfully and consistently, developing a strategy that wins more often than it loses, you could be ready to take your game to the live environment. If you are doing particularly well in demo, try taking it to the next level and opening a micro account before jumping into the deep end.
11) You know what automatic trading is, even if you don’t use it
A good trader knows all the tools, even the ones they don’t use. If you don’t know what automatic trading is, you are missing a big part of your forex education. While it might not be essential to the manual act of trading, it is essential to know, particularly where time is a factor, what is out there and how it all works to make sure you are using all you can to succeed as much as you can in trading. It’s hard enough without just missing out a huge area that could shed light on helpful techniques and scripts.
12) You trade when your system tells you to, not when you’re bored
If you have the discipline to trade only when the conditions are right, then you have a good core of what it takes to succeed in trading. If on the other hand, you are likely to trade out of frustration, or because you’ve not put one on for a while and you want to take something from the market right now, regardless of what your strategy tells you, then you are destined for a big fall.
13) You’re not afraid to do the opposite of what everyone else is doing, if your system tells you to.
If you only ever follow the flock like a sheep, you will only ever have the same result as the masses. By the way, most ‘sheep’ in forex do not succeed. If you hear a tip that there will be a movement one way, but know everyone is saying it and moving to take advantage, if you are the type that will follow suit you may never be more than an average trader. If however, you are willing to follow what your strategy says, and not the flock, to move against the herd when conditions tell you too and to take an educated risk now and again based on solid analysis, you may have the makings of an exceptional trader.
14) You are not easily intimidated or bullied
Nerves of steel are a real asset in trading. If you have them, you are in good stead. If you don't have them, you need to develop them. Price movements can intimidate, particularly when at volume depending on the volatility of the market. If you have faith and trust in your system you can often keep nerve at times where price movement could easily intimidate. But lose that nerve and the market may bully you out of a potentially profitable position. If you can trust your analysis and accept the occasional loss when it does happen, as accounted for in your strategy, then you can succeed in trading.
15) You trust no one and test everything
I’ve seen more holy grails in forex forums than any other type of post. There are so many vultures out there waiting for opportunity to peck away at the capital of the naive and vulnerable. On top of that, there are people offering services, books, guidance, tutoring and sure thing signals all at a price. Even if some of these work for someone, they won’t for everyone. Our trading success is unique to every one of us, as it is reliant quite heavily on what we have internally as much as the market itself. If you forego research and trust one of these vultures blindly, expect to get burnt. Test everything and you can prevent this happening.12) You trade when your system tells you to, not when you’re bored
16) You have learned to ditch arrogance for humility, and that learning is lifelong
Arrogance is one of the key leaders to overconfidence. Overconfidence can make you feel you are the ‘golden child’, that your success is down to a special gift rather than hard work, research, good market interpretation, well followed rules and a little luck. If you allow your ego to consume you, you will eventually fail. Consistent success requires evolution of your trading in line with market changes and behaviour.
17) You have an awareness and interest in how important information affects markets and sentiment
The more you’re in forex because you’re passionate and genuinely interested, the more chance you have for success. Indeed, forex is the kind of business that, unless you love it, will exhaust you and spit you out. It’s not for the faint hearted. Genuine interest and passion keep you motivated, driven and enthusiastic. They encourage the hunt for answers and keep you alive in the exploration of the things that make the market tick, rather than to exhaust you if you lack interest and see this all as a tedious act in the hunt of a quick buck.
18) You know what’s important in choosing a broker
Do you think it’s more important that a broker offers free gifts and huge levels of leverage, or do you believe that customer service, spread, slippage, reliability and security are more important? If it’s the latter, good on you! The important things are well established in your choosing mechanism.
19) You don’t expect anything from anyone and are not looking for people to do the hard work for you
There are still many people today that enter forex in the hunt of a quick and easy buck. They have heard stories of how people have turned small investments into huge balances. Caught by the ‘fisherman’s tales’ they are hooked with the lure of an easy win. The truth about how committed and serious you have to be about forex is sometimes enough to make them reconsider. Others however, look for account managers and agents to trade for them, never really giving the idea of learning to trade themselves any true contemplation. If you are like this, you are not cut out for trading and you should expect to lose your money. The sad thing is, if you haven’t taken the time to learn about forex, you won’t even know why your agent or manager has lost your funds, only that you're broke!
If however, you are prepared to put in the time to learn and commit yourself to the process you stand a good chance. The more serious you take the learning and your investment, the more likely the chance of success.
20) You are confident but not conceited
The difference between the two when it comes to Forex, can be the difference between success and failure. Confidence is a must. To have the confidence in making a trade with no hesitation, to trust your system and your strategy, to have confidence in your analysis and in your actions are signs of a well versed trader. On the other hand, if you are conceited, you are letting the ego fill up on pride and self-admiration. This can lead to emotional trading when hit with an unexpected loss. If you are conceited, you are letting emotions creep into the fray and you need to cut that out before considering a career / investment in forex.
21) You are tenacious
All of the points and criticisms presented in this article can be countered and defeated with hard work. Yes, there are certain traits that will make it easier for you to succeed. Yes, there are personality quirks that will serve you better. However, each and every one of those things can be built or expanded on with hard work, study, and practice. You need to treat forex trading like you would treat any other career. No one just becomes a successful surgeon or attorney overnight. Successful forex trading is no different.
So how many signs do you see in yourself? If you think you have what it takes to be a forex trader, why not download our MT4 software here and set up a demo account.
This post was written by Daniel Lindsay. Follow him on Google + and check out his other blog posts on MahiFX.