The journey to becoming a successful foreign exchange trader is not short: it takes a lot of training, experience and patience! Successful foreign exchange traders have a lot of perseverance, guts and market knowledge. In foreign exchange trading, there is no limit to the quest for knowledge and gathering of information. This is because the more knowledge a trader possesses the better he becomes at trading currencies.
In this article, we shall go through the skills, qualities and attributes that are must-haves for traders who are on a path to foreign exchange trading success.
More patience equals more profits
This is so because you sieve out many so-called “trading opportunities” that come up because you have a personal set of criteria that help you identify highly profitable trading setups and weed out the ones set to fail.
You have a good risk-reward ratio
It is important to have a standard risk to reward ratio for day to day trading. This is because it is more important to preserve your trading capital than to risk all you have for the chance to have a profitable outcome in any given trade.
The daily time frame
A trader that has made the choice to stay in the market and be successful in the long run attaches a little more importance to the daily time frame. This is because it helps the trader identify important zones over a 24-hour trading time. These are the resistance zones, support zones, pivot points and the Fibonacci retracement zones. These are very important price levels or zones that help experienced traders to decide if it is more profitable to take long or short positions on the market.
Maximizing gains is a key strategy
It is an aspect of risk management to manage open positions by decreasing or increasing the sizes of positions. Pyramiding, or increasing the size of an open position, is important to maximize gains. This is useful particularly when the market validates our stance by becoming bullish when we have opened buy positions.
Learn to use market news as confirmations or otherwise
At many times, when high-impact news is anticipated, much of the expected trading starts hours before the actual news event outcome. This is to say that it is important to look at previous, actual and expected data for any important fundamental news.
You realize that until you hit take profit, it is all probabilities
The fear of the markets turning around into a losing streak makes many traders take profits prematurely. This practice results in traders taking small gains and having false hope that the market will eventually turn in their favour when an open position goes wrong. It is therefore best practice to calculate: key essentials before entering a given position; the essentials required for every trade are risk amount per trade; pips at risk (stop loss); and the lot size safe to maintain your trading account.
Right timing is a key tool
It is dangerous to enter the markets prematurely. If one trader enters the market accidentally, it increases the odds against you since you get caught in the middle of existing market mechanics of demand and supply. It pays, therefore, to have patience and watch the markets entering established zones of strong probabilities; that the market will move in a particular direction. If the market invalidates your prior stance, you are still prepared with an exit plan. It is therefore a win – win for a good trader in any case.
You observe indicators but follow your gut feelings
Any currency trader who plans to experience success in the business of trading currencies will ultimately decide to follow his personal observations about the market at any given time. Trading signals and alerts do not become standalone tools that you use in your trading.
Flexibility to market changes
A successful trader does not have a strong rigid stance about market behaviour. This is because no one can ever truly predict what the market will do; it is based on probabilities and market forces of demand and supply. However, since the foreign exchange market plays on volatility and not volume, it becomes more prone to probabilities as compared to demand and supply.
Open positions without emotional bias
It is necessary that traders be without emotional bias as doing so becomes an obstacle to consistent profits in the market. Emotions are not strong enough for a trader to stake their trading capital against.
Be cautious of a range market
The volatility in a ranging market is like the two points of a double edged sword. It can be useful or harmful: it all depends on which side you fall. If you are on the attack side of the sword, good for you; but if you fall on the side where all the volatility is taking away all of your trading capital, you can only to be cautious when the market is in range and patiently wait for signals that confirm whether the market is changing direction.
You occasionally learn to sit and watch from the sidelines
In foreign exchange trading, no position at all is better than a losing position. It takes discipline and good practice to occasionally sit and watch market behavior at specific times or days of the week. It can be a very good trading experience that enhances your skills in becoming a consistently successful foreign exchange trader.
The only thing easy about money is losing it
Statistics have proven that about 90% of foreign exchange traders lose their money. So it is better to be watchful and never add to a losing position as it can be disaster waiting to happen. It is good to follow the advice of veteran foreign exchange traders that say, “let profits run and cut losses short!”