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There are not so many businesses like trading forex. It’s such a wonderful business. I mean, just think about it: No boss to answer to, no accountability to worry about, no workers to spend on, no shifts to rush to, you work when you only choose to, you set your own targets, the freedom to work from wherever you want including the comfort of your bed, and oh the independence that comes with it. But wait, it’s actually business! And like any business undertaking, you must know what you are doing if you are to have any chance of success. Besides, you must put in the work before all the above is reality. Forex trading, as in any business endeavour, is not without challenges. There’s a danger of losing some or even all your investment due to bad trading habits. A lot of dedication, commitment, focus and practice goes into it before any level of success. Then there’s a need to work on self for all the work put in to pay off. This work is a bunch of a few little secrets that professionals hold and practice on a daily basis to become what they are.
Truthfully, there’s no real secret in the sense of the word, it’s just habits practised with discipline. Today I’ll expose these habits that are common to all traders that have attained a level of success in this business. They are so simple, that’s why they are easily overlooked. Chances are that you’ll overlook it too. But my advice is that you save it in a safe ‘emergency’ folder where you can easily run back to find it when you are in serious need, because I guarantee you, you will be. The earlier you treat it with the seriousness it deserves the better for you.
People look for the complicated stuff thinking that’s what will deliver to them the success they crave, and they miss it in the simple. Listen, if anything is hard to understand, quit it. Simplicity is a ‘complicated’ way to succeed; it’s trivialised wisdom. While difficulty is the ‘simplified’ way to failure; it’s exaggerated ignorance. It’s a mystery. I will be demystifying this in a moment though. It’s possible you’re still losing money and have never quite figured out why but there it is. In fact, some failing traders have now come to think trading forex or any financial market for that matter is a gamble and they base their judgement on their “failed” experience.
The markets offer a multitude of opportunities to generate profits. What you do with the opportunities is entirely different. How you deal with them will mean failure or success. It’s not shocking though that only a small minority consistently generate the profits and the rest of the crowd lose their investment. In fact, it’s said about 95% of all newbies lose all their investment within the first 3 months.
That’s a stark statistic! I mean, what in the world is this ‘crowd’ doing wrong? Or rather, what is the 5% doing right in the market that the rest of the crowd isn’t?’ If you are still part of that losing crowd, it behooves you to learn the secrets of the successful handful. Perhaps they are utilizing the best, but often not so well-known methods and resources. It’s not that these methods are hidden and need to be researched but because they so simple they’re easily overlooked. Their simplicity is often mistaken for worthlessness, yet in it is the gold they’ve sought for elsewhere in vain.
As I share them in this article, my hope is that you receive it. You won’t make millions overnight… but you will increase your wealth over time if you learn to take the simple everyday routine approach to success. Otherwise, your struggle continues.
Many come into this business having extremely unrealistic expectations. They think it’s an easy way to make money, they ignoring the fact that there are losses to. In fact, the only guarantee in trading is loss. The outcome of every trade is not guaranteed. Successful traders have learned to accept losses as part of the business. Going into a trade, they know there will only be one of three outcomes with each being a possibility – a loss, a win, or a breakeven result. If the trade is turns out to be a loss, it was just bad deal and they live to make the next trade. You will never be successful until you learn to take a loss. No business is perfect; drawdowns happen to all. You just need to build the mental fortitude to handle them. Understand that you can not control a trade outcome, nor can you control price changes; you can only control your actions.
No matter how much profit you make trading, without a proper risk management plan you are doomed to fail, and risk losing everything. Don’t forget that past results don’t indicate future performance. You must have a solid risk management plan. The 1% to 2% Rule should apply on every trade you take. If you are regularly blowing accounts, it’s not that you don’t have a profitable strategy. You could have a profitable trading strategy but a bad trading plan. You have an undisciplined and inconsistent risk management application. A robust risk management plan will help preserve your capital, and ensure the longevity of your trading career. Every trader loses some money in the markets. as long as you’re trading, losses are inescapable. You can only manage them. Protecting your capital does not mean you would have any losses. It just means keeping them minimal. It means never taking unnecessary risks.
One of the ways of managing risk is to use a stop loss. It’s a predetermined amount of risk that a trader is willing to accept with each trade he takes. It helps limit the traders to a predetermined amount as a percentage of the entire trading capital. Without a stop loss, your entire trading capital is exposed on a single trade, much worse with multiple trades. It’s better to lose with a stop loss exiting a trade that would have ended as a winner in the long run, but because the future is unknown, it could as well have wiped out the entire account before reversing to reach you predicted price.
First of all, you like any business will need a business plan, trading Forex too needs a trading plan. It has to be structured and not random. To make random trade entries and exits is to actually gamble. Most traders attempt to trade without a plan. The read a few articles online and watch some YouTube videos and suddenly they are the experts of the markets. They hear something, a rumour perhaps, or they think some big market moving event is about to happen and just like that they ‘just know’ which direction price will move. They load their position up and boom – their entire capital is gone. That would never have happened if they had a plan. Successful traders create trading plans to guide their trading. Its usually comprehensive to cover every market conditions. And they stick to it. The adherence to the strategy and trading plan eliminates second guessing of trades, takes out emotions so there’s no excitement that can lead to poor trading decisions, and ensures accountability. This helps your trading to become devoid of gambling and ensures accurate timing of trades, consistency and discipline. This in turn improves your edge as all trades are carried out the very same way. The plan will include essentials such as:
The markets evolve and as they do, your knowledge of them has to follow suit too. Different currencies behave differently and different events affect them differently too. Politics, weather patterns (especially catastrophic ones), so many micro and macro-economic factors influence the markets and as a trader you need to know what the impact such factors have on your market of interest. If you are the kind that trades mainly fundamentals, there are no two ways around this, you must know what’s happening that will affect particular instruments.
Also you need to know what news events are coming, when, and their impact on specific currencies. As a technical trader, you too need to know these to read into likely coming long-term trends. As a trader no matter you bias to the trading style, you need to have a good understanding of the markets. Granted, past happenings have no impact on the future performance of the market but a clear understanding of the impact they had helps one have a clear understanding of facts and helps them know what to expect in particular market situations. Learning is therefore a lifelong
The concept is always the same no matter the field of endeavour. As an athlete, if the desire to win races is more important that just running as a hobby, you will spend more hours on the track working on your speed, stamina, and endurance than you would in the actual race. As footballer, if your ambition is to become a professional star, you’ll have to spend more time in a football academy and on the pitch practising than you would in the actual game. If your goal is to become a doctor, you’ll spend more time in school from elementary to graduate level in medical school before ever handling your first patient. A boxer will spend months in a gym to training for an hour’s fight. Same with a body builder lifting weights, a basketballer making shots, a sniper shooting targets, a teacher studying a subject, the list is endless. It’s all always without exception the same. So when it comes to trading, it’s not any different.
Perfection is key to instinctive intuitive trading. This comes through practice until market setups become second nature. On sight, one can easily predict the likely outcome of a market setup with relative accuracy because they’ve seen such setups so many times, have grown to know the common reaction of price whenever they happen and what direction price usually takes thereafter. As such, trading becomes second nature for they’ve been through the same several times before. Nothing beats practice, it’s the mother of all success in this industry. You will hardly have any success however minimal without practice. Its out of practice that trading strategies are birthed, and it’s on these strategies that trading is based before its managed by the help of a trading plan
A journal is basically a record of all your trades including wins, losses, and breakevens. Almost all successful traders have one and make regular retrospectives of their journal entries to spot and eliminate any recurring patterns that lead to losing trades. It’s not the recording of results, rather it’s the record of the process of the trades themselves including:
Every detail is captured for study to help in the next trade. As a reference for future trades, the journal will help to avoid the mistakes made on the previous losing trades while repeating the same right things done on previous winning trades. It’s no doubt a recipe for success that the majority of traders in the forex business have ignored and it’s no wonder the same majority lose. To those that keep it, it becomes a book of reference to help. Many are just concerned with quantity and forget it’s about the quality of trades. Without the knowledge of why your trades lose you can’t know the common factor for the losses as each trade might appear to have a unique one. A journal will identify that which is common in all failed cases to avoid similar mistakes in future trades.
A trading Journal is a MUST have tool successful traders can’t live without. This allows you to easily look back and identify flaws in your strategy. While others continue making similar mistakes, one with a journal continuously improves because they have a reference point for every similar trade. Needless to say, maintaining all your trading records will help you avoid making costly decisions. Many successful traders keep diligent records of their trades. This essential habit provides them a wealth of information that helps them beat the odds and attain success.
Professional traders have learnt how to muster their emotions from the ensuing chaos that’s usually resultant from a loss. They are not affected by the outcome of the last trade – win or loss. they have learnt to trust their trading strategy that if the same setup that produced a lose on the last trade came up, they would still take the trade despite the same set up losing previously. They know that success is not determined by one trade buy by a series of trades. They are detached from the trade outcomes because they know that trading is about probabilities. This is what losing traders have failed to understand and it leads to inconsistency in trading decisions which also results in inconsistent results.
As a new trader, you need to stay focused on the goal when trading. Know that losses are part of trading and accept them as a business expense. When you get a win, just know it’s a step towards establishing lasting business. And such wins grow, so does the business.
The moment you come to appreciate as a trader wins and losses as part of this business, emotions lose their grip and influence over your trading and performance thereafter. Approach every trade with the mindset od detachment leaving the result to the market forces to demand and supply to play out your trade to either a win, a loss, or a breakeven trade without you attachment emotionally. If it was a loss, as long as it was called by your strategy and according to your trading plan, it was a good trading decision that just didn’t deliver a win. Take the same trade up again the next time your strategy calls it regardless of the previous outcome.
Setting realistic goals is an essential part of keeping trading in perspective. Your business should earn a reasonable return in a reasonable amount of time. If you expect to be a multi-millionaire by Tuesday, you’re setting yourself up for failure.
Professionals don’t make random trades. There is no dependence on hope when it comes to forex trading. Every trading decision is informed. They will consider different data for analysis before making a single trading decision. It’s usually fundamental, technical and sentiment analysis.
For fundamental analysis, focus is mainly on particular currency’s interest rate because they have a profound impact on the forex markets with more importance and far more reaching effects than other factors like gross domestic product, inflation, manufacturing, economic growth activity.
Technical analysis is centered on the price action and the structure of the market.
Sentimental analysis is based on client sentiment either by observing the net number of traders’ long or short, or by trading the difference in net short/long movements.
Its these types of analyses that determine a professional trader’s decision to transact in the market
Successful traders follow a particular routine in their trading. They often times do the same things day to day. These traders know that their edge in the market is not based on a single outcome from trading decision, but from multiple trades. they therefore stick to a particular methodology which they apply repetitively. Their edge is attained through the application of the same strategy over a series of trades not just one. They will therefore apply the same strategy repetitively regardless of the last result – win or loss.
The mistake most traders make is shift from one strategy to the other after the first strategy producing a few consecutive losses. This is one of the worst possible mistake a trader can make. Traders especially those that are glued to their screens watching every tick will will be affected by the combination of adrenaline surge and emotional chaos as the running trade goes a few pips against them. This will impair and affect their judgement leading them to abandon and drift from their plan.
Successful professionals don’t change their trading plans on whims. They have learnt to block out emotions to avoid impulsive reactions to minor events. They stick to their trading plans to enable them make sound judgments, eliminate subjectivity, avoid missing out of would have been winning trades and thereby maintain their winning edge. Ignore distractions, temptations, and fears. Even when you are willing to increase your leverage ratio to cover a loss, do not break your own trading rules.
Successful traders are highly disciplined. They never lose their focus and do all that they can to attain their goals. In order to practice discipline, you must devise an independent trading strategy that will be a perfect fit for you so you don’t have to move around multiple strategies.
Many traders, after watching some trading scams online promising them systems that would double their account balance in a matter of days, quickly jump into the live market without even testing them out, thinking they’ve got what it takes to succeed. How sad! That’s not the way business is done. Taking the time to develop a sound trading methodology is worth every effort when it’s all said and done. People spend years in college to acquire master’s degrees when all they did was in reality master nothing but increase their employability.
But trading has everything to master. Its unfortunate some think it’s just a matter of copying or simply picking some junk from the net, applying it and trading their way to millions. Think again. There’s no way that’s going to happen. If you need a masters to help run another’s business, you can’t need anything less to run your own. You must master your craft. The difference is that unlike the academia, trading is practical. Mastery comes by repetitive practice, trial and error until a profitable methodology is created that suits your style, character, and goals.
Great traders probe their trading and testing results. They know how to step back and go through each trade in order to develop new and unique trading strategies. If they encounter a loss, they ask what they could have done differently. No matter how many times they fail, their probing nature allows them to learn from trial and error during testing to get the a right techniques that will bring them the most profits.
There are no formulas to success, no secret magic potions, and really no secrets at all – just strategies. Once you’ve understood the complexities of trading Forex, it’s time to establish a strategy. Mastering one simple strategy is better than failing at trying different complex ones.
Successful traders often take their profits off the table. No one has ever become broke taking profits. They know how to read into the market structure and react to price behavior. Greed is a killer. They know when to hold onto a winning trade and when to cash it out. It’s not uncommon for traders to hold a trade longer than they should after reaching their target in the hope that they might have caught the trend in its infancy and want to ride it out to its peak. Unfortunately, an event comes with unexpected results and drives prices the opposite way wiping out all the profits they’d made. Its profits the grow the account, and they do by being taken off the table. Never be afraid to take profit, it’s the reason you trade anyway. But there is no telling of how far price will go so you can’t bet your profits on it. Profits running are not profits made, for they can still reverse. That winner if not honored by closing it can quickly turn into a loser. Only those that are off the market are yours.
Successful traders know how to pay themselves. Like any businessman, a payment of some kind is a motivating factor to dedicate more of one’s efforts to the business. You tend to appreciate the business more when its making you money not only to your trading account but to the bank. These traders often make regular withdraws of their profits as a way of rewarding their own trading efforts. As a trader, as more and more of the capital is drawn from the broker as profit, the confidence to trade without emotional attachment grows since the original capital is already secured safe with the trader’s bank.
Your original capital is now safe and sound, you are literally financially ahead, trading with winnings. In a way, you’re trading risk free with the brokers money.. Of course it’s not the broker’s since you made it, but that’s the sense of detachment I’m talking about. There is a direct correlation between confidence and profitability. Therefore, there is nothing wrong with allowing your account to grow. But you also need to remove a percentage of your profits on a regular basis as compensation for your hard work is important
Business grows through investments. As profits are made and the traders pay themselves by withdrawing a portion of their earned trading income, the rest of the profits are reinvested back into the business to increase the trading capital. Businesses don’t grow without some kind of reinvestment. The beauty here is that you trading business grows with its own generated income, not new capital reinvestment. The percentage of risk on each trade remains the same and so as they business grows, are do the returns.
Successful traders are unbreakably vigilant. You know thing with losing traders, when they begin to get profitable, in their minds they think about in the money. They think they’ve overcome the free, cracked the code to beating the markets, they can now make as much money, go chill in the sunset, and live profitably ever after. Well, good luck. It’s just euphoria and nothing else. Its ‘wicked’ confidence that has you believe you have control over the outcome of trades. it makes you think you know how to trade, makes you ignore your edge, lose humility and just when you think you got it, you blowup! Successful traders know that the moment you think you’ve got it all together, that’s the moment you’ve lost it. this is what keeps their confidence measured and gains them emotional mastery to consistently produce profit all the time.
In forex trading, everything else can be controlled except the outcome. This overconfidence is like going to the casino and you think you can bet all your money and win big not knowing you came in rich but will leave broke. You can win for a while just long enough to entice you to stake it all. And sure enough, you play a few more times and it’s all ‘Gone with the Wind’.
Patience is not something most traders have in abundance. Its a tough trait for most people The patience to be able to sit, wait, and watch for your signal or set up before initiating a trade is an absolute prerequisite that successful traders hold dear. As a beginner trader, it’s a fantasy to expect making big profits right off the start. You need the patience to learn the ropes and understand what the markets offer and how they operate. A successful trader will be quick to take losses and slow to make profits.
Do not be in a rush to take profits, develop consistent trading strategies and your profits will slowly accumulate. Traders should always be patient with the markets and only trade when they will get the most out of it. This means trading only when there is right setup in the market that meets their trade criteria. Successful traders don’t waste their punches guessing the market going up or down, they are disciplined and patient to wait for their strategy to call setups that are according to their trading plan. Anything else is self-destructive gambling.
Professionals are consistent in their trading approach. They approach all trades the same regardless of the last result. Their trading is defined by their plan. Their strategy is clearly spelt out with the exact conditions for entry and exits. Whenever these conditions occur, there is no doubt, no hesitation, no procrastination, and no second guessing on their part, they will blindly take the trade. They will open a position in the market no matter their emotions, logic, or fear that may be screaming otherwise.
They outlined their strategy at the beginning of their trading, have learnt to trust it, and they stick to it throughout all their trading applying the same on all trades no matter what as long as the trading conditions outlined in their strategy are in place. Deviation from this routine is what causes inconsistencies in trading results and they have learnt this well. As a losing trader, you need to research your strategy well. Do tests on it through back testing by simulating live market conditions. If it gives you consistently profitable results through a series of trades over a reasonable sample size of simulated live market conditions, trust it.
The best sample size is anywhere between 30 and 100 trades. But through 30 trades it should have you with a profitable result. If not, find out why, then tweak and adjust it to make it profitable. And when it finally is over a series of trades, trust it and apply it on all trades regardless of the outcome of the last trade.
The key to success is just you being consistent, following the strategy you’ve worked hard on! When things turn out wrong – and they will – stick to your strategy. Keep your entry, exit, and stop orders as as your time-tested strategy dictates. Repetition is boring, but its necessary for success. Simplicity and consistency lead to success overtime.
Many traders after a series of winners, wish they had used a bigger position size. They rue their conservativeness in position sizing. A such, they become careless and recklessly increase their position size thinking they’ve finally figured out the market not knowing it’s just a winning streak that could on another day been a losing streak. They get over confident and deviate from their plan. Then BOOM. A loss strikes and all their profits and half their investment is gone. Successful traders know that their longevity in the markets is determined by how much exposure they have in the market. As such, their risk is measured not based on the success of a few trades but on the likelihood of loss on their next trade. They prefer to grow their accounts over a series of trades than random chanced happenings.
If you are to be successful in trading forex, you’ll have to treat it like a business. This calls for commitment, focus, time investment, research into systems and strategies, and investment into knowledge. You are actually the CEO of your business. You have to be accountable, audit your own trades and see why they fail, research into strategies to help maximize your trading bossiness’ potential which could include automated systems. Handle it as a for-profit adventure that has to feed you. Like any business, it incurs expenses, losses, and it’s risky. You have to treat it like a full-time business not a hobby. Imagine you ran a business in an expensive rental space and you didn’t mind that you were not making any profits, how about that? That would be just stupid, but that’s exactly what you’re doing with your trading. Makes sense? So what will you do about it?
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