7 Things Highly Successful Traders Do
To find success in anything in life; there is no shame in walking in the footsteps of those that already blazed the trail. Forex is no different. There are many successful forex traders and investors out there who have already walked the path you are on. Looking at their habits and approaches can provide the insight you need to maintain or maximize your profitability. Here are some habits and points that you may want to explore while seeking success in the forex markets.
1. Develop information avenues for market conditions and upcoming events
There are many factors that go into driving price action. Quite a few of these things are publicly known and broadcast far in advance. Find yourself a website that offers a calendar of upcoming economic events that can have an affect on currencies you trade. There is always the threat of getting whipsawed out of a position that looks pristine with the impact that news has on the markets.
Listening to analysts and advisers can provide insight on circumstances you may have overlooked. On the other hand, you want to be careful about basing your trading decisions on the information provided by one or two other people. Each trading you decision you make needs to be the right one for you, for your strategy, for your profitability. There are a lot of analysts out there and not all of them have a good grasp on what they are talking about.
2. Strive for consistency to generate repeated, positive results
Humans are creatures of habit. Working to turn your habit into instinct will provide a significant edge in your trading analysis. How do you do that? Repetition. A trader must continuously practice their method, edge, and trading circumstances to make it a natural extension of themselves. One could look at a martial artist as a metaphor for this practice. The martial artist practices, practices, and practices more to make their maneuvers an extension of their person so they don't have to think about them when the time arises. Traders should do the same to incorporate their trading plan and practices into successful execution.
Do your analysis and trading at a consistent time (if possible). Review your plan, entry, and exit criteria before executing any transaction. Document every transaction with screenshots of the charts to accompany the information so you can visually identify the results.
3. Education and understanding are at the heart of every successful venture
Forex is a discipline where a person should never stop learning. You never know when you may pull a single sentence of wisdom out of a book or forex trading video that can help you improve your profitability. Forex communities are another great way to develop your knowledge of the forex market provided it is a quality one. A lot of times you can gauge quality by activity of mods and just the quality of the first posts in different threads.
On the other hand, one must be careful to not try and fit everything they learn into their own trading strategy. Not everything you learn will be relevant to the way you approach forex. Not everyone with an opinion is worth listening to. Check and cross-check information before you decide to integrate it into your own trading plan. You only want the most relevant, best information that applies to your philosophy on forex trading.
4. Document every success and failure to gain wisdom from them
Failing is almost as valuable as succeeding for the person wanting long-term success in any venture, forex included. Everyone makes mistakes. People that succeed learn from those mistakes and ensure the mistake is not made a second time. Each trade will have reasons it may have succeeded or failed. You should document each transaction in your trading journal along with the reasons why it may have succeeded or failed.
It is important to dig below the surface to get to real answers. For example, if a trade gets stopped out; why did it get stopped out? Did you neglect to check for economic events regarding a currency in the pair that took you out? Was there some world event? Or was it just some unidentified circumstance that you cannot nail down?
There will be a periodic trade that you can't pin down the success or failure of but most of them will have clear reasons for their movement. So many traders fail to properly document their transactions for analysis. Don't make that mistake!
5. Eliminate any potential intangibles in your Trading Plan that can derail your success
A lot has been said on the necessity of Trading Plans and strategies to find success. If you have one drawn up- great! There is likely to be room for some refinement and honing to ensure you are eliminating any potential future confusion. One of the purposes of the Trading Plan is to eliminate excessive thinking, confusion, and emotion from the process. Take some time to think about your last ten trades and how much effort you had to put in to determining whether they were good trades.
If you had to dedicate a lot of effort to it; then your Trading Plan may not be as clearly defined as it should be.
Here are a couple of often neglected points:
- All criteria for Stops and exits.
Are you using a time based strategy? Where is your Stop Loss placed? When do you advance it to Break Even? Do not use mental stops; clearly define them and place them appropriately every time. Each trade should have clear definition. Yes, every trade is unique. That's why you should have a few predefined exit strategies in place before you ever place one.
- Eliminate or define any intangible entry criteria.
The most common is the hallowed Break Out trade. Break Outs can provide a significant amount of momentum that can put money in your account. However, traders don't always define what makes a clear Break Out and subsequently get caught in the pull-back of a false Break Out. So what constitutes a tradeable Break Out? A good rule of thumb is if a candlestick closes X number of pips past the Support/Resistance level.
6. Familiarize yourself with the more common indicators that other traders use
So you've been trading for awhile, found a great strategy that works for you, but want to improve the number of pips you take. How you can do that without changing your own strategy too much? Take the time to research and understand some of the more common indicators that other traders use that you may not use in your strategy. The idea is to get into the minds of other traders to try and predict how they are going to respond to a given market action.
That does not mean you will adopt these signals as part of your own trading strategy. Instead, if you are unclear on a potential trade, they can be referenced to see if other traders will be seeing a similarly profitable signal that they may act on. Some of the most commonly used indicators to familiarize yourself with include:
- EMA (200)
- Fibonacci Retracement
7. Develop your patience and temper your emotions
The mind game is the biggest hurdle to overcome for any trader. Even traders of intermediate experience still make the periodic mistake from lack of emotional discipline or patience. This is a skill that one needs to actively work on to develop. The good news is; it's a skill that will serve you in several other facets of your life. Family, friends, and coworkers can often use a little extra patience or neutrality when problems arise.
A great way to work on this aspect of your mental game is to embrace other relaxing activities to put your mind in the right place. A number of traders like to meditate before they open their platform. Others trade with soft, soothing music to focus on to drive anxiety away. The best measure? Days off. The retail spot market is closed two days a week. Use at least one of those days to push forex, the successes, and the failures out of your mind.
Your mind is a powerful muscle but it needs rest to maintain its strength in the long-term. Don't be afraid to take breaks to reduce the long-term stress and improve your ability to think with clarity. The markets will be there in the coming week.
Monitor your emotions closely. If you feel yourself getting out of sorts and too angry; just wait for a little while. It's easy to make emotional mistakes if you simply act on whatever emotions flood your mind the moment of or shortly after. But what about in ten minutes? Will your emotional reaction still be the best course of action in your mind? Probably not.
This post was written by Dennis Heil, a private forex trader from Ventura CA. You can read more articles from Dennis over on his MahiFX author page.
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