Success in forex doesn’t just come and find you, you have to go out and get it. The goal of any successful professional in every field is to reach the heights of his profession and achieve the best personal rewards–for example, to become the best doctor, the best lawyer, or the best trader.
Becoming consistently successful in forex trading takes far more than having a trading idea or strategy. To reach a level where your wins consistently outweigh your losses, you need a mix of the right ideas, risk management, emotional state and temperament. You need strength and discipline to practice the correct habit of money management. I would recommend the three undeniably important ingredients below:
Tudor Jones said that the secret to being successful from a trading perspective is to have an indefatigable, undying and unquenchable thirst for information and knowledge.
Don’t make too many assumptions, instead ask and learn from those who know. An old Chinese proverb goes “he who asks a question is only a fool for a short time, but he who does not ask a question remains a fool forever”.
The word ASK could be an acronym for Always Seek Knowledge. Whether you are completely new or have been trading for a while but never had any quality training, it’s high time to seek it out. Trading education is the foundation on which to build your trading skills; or else you will basically be wandering around in the dark hoping to stumble on some lucky breaks. We find what we expect to find and we receive what we ask for. A great trader is like a great athlete. You need to have the natural skills and to train yourself to use them consistently. Always keep improving yourself.
Manage your money effectively.
This second ingredient is about risk and money management. First, define the level of risk you feel ready to take on. Start with a demo account, then with a small position in a real account, and then build it up. Warren Buffet remarked it’s best to never test the depth of water with both legs in it. Here is the essence of risk management: risk no more than you can afford to lose, and also risk enough so that a win is meaningful.
If you can’t afford to sustain a loss, don’t trade. Always protect your downside. We want to perceive ourselves as winners, but successful traders also keep a check on their losses. Always preserve capital and ensure the reward outweighs the risk. It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.
Manage your emotions.
The third ingredient to improve your trading is emotional discipline. If you can’t control your emotions, you can’t control your money. If intelligence were all that is needed, there would be a lot more people making successful trades. Your ego should not be allowed to get in the way. Trading is a psychological game. Most people think that they are playing against the market, but the market doesn’t care. You are really playing against yourself. Both fear of losses and ear of profit loss are to be watched and controlled.
Ready to learn more? Check out this article on basic trading terminology like pips, margin and leverage.