Trading for a living can be the most profitable career in the world but it can also be the most expensive if you don’t do it properly. I’ve written a list below of some of the main traits of successful Forex traders.
I think one of the keys to trading success can be summed up with one of Einstein’s famous quotes. “Make things as simple as possible, but no simpler.” You should be able to explain your trading methodology to a ten-year-old, and have them fully understand it.
The list below comprises a number of different observations of myself and others through experience working with traders of all shapes and sizes, and is equally relevant to all.
They are realistic and experienced – Probably the most horrifying and worst lie told to anyone considering trading for a living is that you will compound millions in an extremely short amount of time. – Be realistic! The only true way to make every day profitable comes through experience, and countless hours of learning is crucial to longevity of success. Continuing education, computer screen time and practice, practice and more practice are the keys to success.
They know the damage they are capable of – The best traders I know of understand their limits, and seem to focus more on what can go wrong than what can go right. They are not easily convinced of lucrative outcomes, and have a very high sense of self-awareness. When a professional trader makes a trade he studies how much he might lose. When an amateur makes a trade he looks at how much he might win. Amateur traders turn into professional traders when they stop looking for the “next great technical indicator or system” and start controlling their risk on each trade.
They trade to make money, not to be right – They understand the strengths and possible pitfalls of what it is they do for a living, and use that knowledge to curb their emotional output. To be successful traders we need to release ourselves from the need to be right. The market is always right and it’s no use fighting that point. It’s crucial not to get locked into a specific opinion about the market because if you do you miss all the signs from the market that may be telling you that you are wrong. The “I’m right, the markets are wrong” philosophy will ruin you.
After all, what’s more important, being right or making money? For me, it’s making money, so don’t be stubborn, be flexible and have the ability to change your mind if the market is telling you you’re wrong.
They have an edge and know how to use it – They understand that without it they wouldn’t last long. You must have an edge that genuinely puts the odds of success in your favour. This can be any Forex trading method you want that has been tested by you and that you have complete confidence. I may be biased, but I like my method.
They have a trading plan, and follow it religiously – Each trade is planned and opportunities are scouted before any trading takes place. They steer away from the killer of all killers: overtrading. This trading plan is a complete set of rules that covers every aspect of a trader’s life. It contains various methods, strategies and trading rules that will give him an edge over most traders. Sticking rigidly to this plan will improve his chances of success.
They manage risk – Regardless of how much conviction they have on a trade, they will still do what they can to avoid the potential of any losses and understand the first rule of trading: anything can happen. A successful Forex trader understands that good money management will keep him in the game when most novices are knocked out. He sticks to his money management rules. In particular a good trader never risks more than 2% of his account on any one trade.
He always sets a stoploss as per the strategy being used. It will save him significant losses if the trade goes against him. He realizes that a stoploss is his only true friend in trading.
They work obsessively – They follow each turn, each piece of info that comes out in regards to their trade, and follow any underlying information relevant to failure or success. Elite forex traders learn their craft. It takes hard work, persistence and much practice. There are no shortcuts to trading success.
They think about the trade, not the money behind it – Focusing on money can destroy your means to objectively assess the trade itself. Focus on the trade and applying your rules with discipline and the money will follow.
They are constantly learning – Just when you think you know it all about trading, a new curveball gets thrown your way. Good traders constantly get retrained, learn new things, attend seminars and so on.
They have patience – They understand that the money will come, but everything needs to be in place first. Waiting for the correct setup to occur takes patience so you must sit on your hands until it happens. Forex trading is not a get rich quick scheme. The idea is to stay in the game. If you miss setups for any reason, don’t chase the trade but wait until the next setup occurs.
Once in the trade, have the patience to let the trade develop as planned rather than rush the trade and cut it off prematurely. If a setup does not occur, then don’t trade. Not trading is trading; it is making a conscious decision not to trade and that forms part of your trading plan.