Are you aware of the 10 insider’s secrets that can help you achieve Forex Trading Success?
Here’s my personal take on the matter.
As an seasoned FX trader, I’ve realized that achieving Forex Trading Success in the largest financial market in the world is not as “Easy” as what most online trading gurus portray it to be.
After “Surviving” more than a decade in the FX industry, I can safely conclude that there is just too many “Moving” parts in the delicate equation for long term Trading Success in the FX markets.
During my personal search for the elusive Holy Grail of trading, I found that market dynamics evolve all the time and there is no single trading strategy that works well all the time.
Achieving consistent positive trading expectancy requires a deep understanding of many factors.
Including both internal and external factors that can significantly impact a trader’s performance in the dynamic FX markets.
To better understand this complex topic, let’s simplify the equation and break it down into individual elements I believe are essential building blocks to achieving long term forex trading success.
1. Emotional Control: The Role of Mindfulness
Mastering Your Emotions:
The Forex market can often evoke strong emotional responses in traders,
Especially when seemingly routine trades don’t go as planned, only to go in the intended direction after your Stop Loss is hit.
This could jolly well be the worst emotion outbreak one could experience as a trader.
Trust me, this happens more often than not.
Thus, the ability to control what I personally refer to as the 5 pillars of emotional destruction namely fear, greed, hope, ignorance and revenge are crucial for making rational trading decisions.
Practicing Mindfulness:
The practice of “Mindfulness” in trading helps the trader maintain a calm, objective approach, essential for effective decision-making under pressure.
In my book, mindfulness is an essential skillset all traders must strive to master as part of their trading arsenal.
2. Risk & Money Management Rules
Same Same But Different:
As a responsible trader, we should establish clear rules for both Risk & Money management in our pursuit of Forex Trading Success.
However, I discovered that many traders often confuse between the two.
Risk management is about understanding and mitigating the various risks associated with different types of capital markets and financial instruments.
Money management, on the other hand, is more focused on the effective administration of a trader’s capital, dealing with how much money is risked on each trade such as the 1%-2% risk per trade rule.
This helps ensuring that a single trading loss does not significantly impact the trader’s ability to continue trading.
Capital Preservation:
Ultimately, the key agenda of both Risk & Money Management is the preservation of your hard earned capital.
Always focus on protecting your trading capital as the primary goal, with earning profits being secondary, period.
Trust me, if you able to focus on minimizing your losses, the gains will naturally come over the longer term.
3. Selecting a Trading Strategy Suited to Your Personality and Availability
Personality Compatibility:
I realized that sometimes we force ourselves to “Adopt” to a trading strategy that we are taught in a paid trading course conducted by some famous trading guru.
No doubt that particular trading strategy may have yielded excellent profits for the guru personally.
But the lingering question is whether it can do the same for you.
Have you tested it out extensively with proven trading results whether that particular trading strategy is suitable and compatible to your own trading style?
Remember, choosing a trading strategy that aligns with your own personality and risk tolerance is the key to your own Forex Trading Success.
Time & Availability Consideration:
Imagine if you discovered a trading strategy that has a high success rate but requires you to stay in front of your trading screen 8-10 hours a day watching the markets with eagle eyes.
Are you able to spare that kind of time and commitment to such a demanding trading task while juggling between family and other commitments?
To cut a long story short, no matter how great a trading strategy might be it , it should always fit seamlessly into your daily routine, whether it’s day trading, swing trading or scalping.
Successful trading should be akin to a lifestyle choice in my opinion.
4. Adequate Trading Infrastructure
Reliable & Stable Connections :
Always ensure you have a reliable trading platform, a stable internet connection as well as timely access to real-time market data such as economic news releases.
Trading in MacDonald’s restaurant with free Wi-Fi may seem cool initially but is a sure fire way to run into connectivity and execution issues when the Wi-Fi is over loaded.
Trust me, I have done that and messed up many of my trades on several occasions, definitely not a good experience.
Improved Infrastructure Setup:
A well-organized and structured trading environment enhances both efficiency and focus.
And having sufficient screen space is a no longer a luxury but a necessity if you are serious about trading.
I used to think that prop traders armed with a plethora of trading screens are over-the top exaggerating until I started to trade “Seriously” as a legit business instead of just a hobby.
Although many aspiring traders might disagree on this matter.
But I sincerely believe that extensive screen real estate does allow professional traders to concurrently observe more interconnected markets and multiple time frames for better and more informed decision making in achieving Forex Trading Success.
5. Constant Back Testing and Forward Testing
Evaluating Strategies:
Back testing is invaluable for initial strategy development, offering a risk-free environment to test out your trading hypotheses against past historical data.
Regularly back testing of your trading strategies helps confirm their potential effectiveness and can often act as a “Confidence” booster if the trading results are exemplary.
Adapting to Change:
Forward testing, on the other hand, provides a more realistic view of how your trading strategy might perform under current market conditions.
The key here is to make subtle changes to your trading strategy in order to adapt to the dynamic changes of the FX markets.
Combo Effect :
Savvy traders often use a combination of both to develop, refine and validate their trading strategies.
Take note that we need to recognize the limitations of each method and use them complementarily in order to achieve a more robust understanding of a trading strategy’s potential performance.
Always remember the most commonly used phrase in world of trading “Past Performance Is Not Indicative Of Future Results” and you will always stay humble in your pursuit of Forex Trading Success.
6. The Importance of Maintaining A Trading Journal
Tracking Trading Results:
A good Trading Journal keeps detailed records of your trade setups and results allowing traders to analyze what’s working and what’s not with their trading strategies.
It allows for clearer decision making with regards to which trading strategy works better under which market conditions.
Tracking Emotions During Execution:
This is an aspect of the trading journal that is often neglected or missed out by most traders, regardless novice or seasoned.
Recording and analyzing our “Emotional State Of Mind” during trade execution is an important insight that can adversely improve our trading performance over time.
Taking note of how emotions like stress or excitement affect one’s trading choices plays a pivotal role.
From personal experiences, a fight or quarrel with my spouse on the trading day has the most detrimental effect on my own trading results based on my personal statistics.
Learning From Past Mistakes:
It is imperative that we review our trading journal on a periodic basis for maintaining optimal result in the pursuit of Forex trading success.
Depending on your schedule but I would say once a month should be ideal.
Constant and effective reviews allows traders to “Spot Errors” in their trading approach and Identify repeated mistakes that cost you money.
Use your trading journal to learn from the lessons of past trades, both successful and unsuccessful as both a form of encouragement and as a form of deep reflection respectively.
7. Plan the Trade & Trade the Plan
The Golden Rule Of Trading :
This Golden Rule emphasizes the importance of having a well thought out trading strategy and sticking rigorously to it.
By planning your trades, you set clear guidelines on when to enter and exit the FX market, how much risk to take, and what your profit and exit targets are.
This preparation helps in making informed decisions, rather than reacting impulsively to market changes.
Religious Like Execution :
Remember, once the plan is set, it’s crucial to follow it rigorously.
Deviating from the plan often leads to emotional trading, which can result in unnecessary losses.
Sticking to the plan helps maintain discipline, reduces the impact of emotions on trading decisions, and leads to more consistent and predictable outcomes.
For traders aiming for long-term forex trading success, planning each trade and faithfully executing that plan is crucial.
8. Continual Trading Education
Never Stop Learning:
The Forex market is constantly evolving and so should the trader.
Reckon the worst mistake any aspiring trader can make is that they think they can “Conquer” the FX markets just after attending any 3 or 5 day trading course.
Staying informed and educated on current market trends and new trading technologies are essential if traders want to survive in this competitive environment.
Utilizing Available Resources:
There are so many trading books, online courses, webinars, and workshops traders can learn from in order to stay informed.
Imagine all the new trading skills you can literally pick up and master if you just attend a trading seminar or webinar instead of wasting the entire weekend watching NETFLIX.
9. Support from Like-Minded Trading Community & Mentors
Community Engagement:
Increase your level of enthusiasm for all things trading simply by joining popular trading forums and FB groups that share genuine trading experiences and strategies.
You never know what valuable lessons you can learn from other traders who has been thorough the ups and downs of the steep learning curve before achieving forex trading success.
Mentorship:
Getting advice from a trading mentor who uses similar trading strategies as you can be a huge time-saver. It’s like skipping years of making mistakes and learning things the tough way. They can show you the ropes quickly and easily.
It is by far the fastest way to achieving Forex Trading Success in my opinion.
10. Awareness Of Vital Economic News Announcements
Staying Informed:
Economic news can dramatically affect the currency markets, period.
Key reports like Non Farm Payrolls, GDP, employment data, interest rate decisions, and inflation figures can cause significant market volatility in the FX markets.
Utilizing economic calendars from popular trading websites like TradingEconomics are crucial to not getting your winning trading whipsawed into losses.
Being aware of the exact timing and nature of these announcements are critical as they can offer trading opportunities or signal potential risks if caught unaware.
Strategic Adaptation:
Make sure to adjust your trading strategy around major announcements.
Some traders including myself prefer to avoid trading during these times due to increased volatility, while others are eager to look for opportunities to capitalize on these large market movements during economic releases.
Especially during major economic releases, it’s crucial to have stringent risk management measures in place. This might include setting tighter stop-loss orders, reducing position sizes, or ensuring adequate margin in your account.
Conclusion
Achieving Forex Trading Success is a multifaceted journey. It requires not only an deep understanding of market trends and technical analysis but also a keen awareness of fundamental news that can sway the markets significantly.
By focusing on these key areas such as emotional control, risk management, strategy selection, infrastructure, testing, journaling, trading psychology, patience, continual education, community support, and staying informed about economic news aspiring traders can equip themselves with a comprehensive toolkit for long-term forex trading success.
In my book, forex trading offers a unique blend of challenges and opportunities. It’s not just about the potential for huge financial gains, it’s also a path of personal growth, learning, and adaptability.
Embrace each aspect of this FX trading journey with dedication, commitment and discipline.
Remember, in Forex trading, the only constant is change, and your success hinges on your ability to navigate and adapt to these changes.
So stay informed, stay disciplined, and enjoy the journey of becoming a successful Forex trader.