Note: This article is part one of a two-part series. In this part, we will cover the first 3 qualities of a successful trader.
What do successful Forex traders have that sets them apart from the rest?
We have all heard the typical reasons such as experience, discipline and strategy. While these may be factors, there are other, less obvious differences.
The conclusion is as follows…
Successful Forex traders think differently from the rest. They are not concerned about the need for a high-profit rate or trying to trade every day regardless of market conditions.
In this article, I will share with you six of the main qualities that the best Forex Traders in the world possess. What follows is a combination of lessons I’ve learned since I started trading in 2009.
Let’s go into detail, the best traders:
1. Don’t “lose”
2. Use price action
3. Have a definite trading advantage
4. Don’t try too hard
5. Think in terms of risk
6. Don’t need the money
1. They don’t “lose”
No Forex Trader avoids losses. But there is a clear difference between how the beginner trader loses and how the best Forex traders lose.
What’s the difference?
Most of those who start trading the Forex market see a loss as a bad thing. It’s a way of pointing out that they did something wrong. Even worse they did something wrong that hurt them financially and even emotionally at times. At least that’s what we’ve come to believe throughout our lives.
However, the successful trader does not necessarily see a loss as a “bad” thing.
It’s not something the market did to you either. The Forex market does not know where you entered or where your stop-loss order is located.
Unlike you, the market is always neutral. So, when you lose, it’s a matter of reflecting on what you could have done better.
Do not get me wrong, nobody likes a position to go against them. I do not care if you have been trading for a month or ten years, it’s always nicer to make money than to lose it.
That said, just because a trade or position doesn’t go well doesn’t mean you have to take it personally. Thinking this way will only dig you into a deeper hole.
The successful Forex Trader has the mindset that a loss is simply feedback.
It is the market’s way of disproving a trading setup. That’s the only thing the Forex market has the ability to do because it doesn’t know anything about you or where you entered the market, nor does it care.
Losses can be a powerful way to learn. Just remember that even a trade where you end up losing could still have been the right decision.
How is that possible, you ask?
If you have defined your trading strategy and the circumstances met all your criteria to enter the market, then you did your best. The rest depends on the market, and some days the market simply doesn’t follow the game.
Next time you have a loss, take it as constructive feedback. Discuss the situation to see how you can improve next time. Note, however, that even an A+ setup doesn’t always work.
I have had many trades that did not work, that I would gladly take every week.
That is because I know my trading strategy will gain over time and put money in my account. In fact, a good exercise after a losing trade is to ask yourself, “Would you re-enter this same setting next week if you saw it again?”
It would always be nice to be able to answer this question with a resounding “yes”.
If you respond with a “no”, you must take a step back, determine where it went wrong and correct it for the next trade.
Start seeing losses as learning opportunities rather than disappointments. Each loss is an investment in your trading education and ultimately in your trading business.
The money you put at risk in any trade, whether it is $5 or $500, is an investment with the best Forex trainer in the world: The Market. Keep an open mind and it will show you everything you need to know.
2. Use price action
All the successful Forex traders I have known use price action in some form or another.
This does not mean that they are using price action in the same way that I use it, but they are using some form of price action as part of their strategy.
Whether a Trader is using raw price action or simply using it to identify a key level in the market, price action plays an important role in any strategy.
That’s because it serves as a representation of psychology within a market. It gives us a window into the minds of other traders.
Having an idea of where buy and sell orders are placed in the market is critical to becoming the best Forex trader you can be. You can strengthen any strategy by finding areas to observe potential entries as well as profit targets.
Trading Forex without using some form of price action is like trying to drive a car with one eye closed. It can be done, but I wouldn’t recommend it.
So, even if you’re developing a strategy based on indicators, you will want to learn about price action. At the very least, it will provide a solid foundation from which you can design and develop other strategies.
3. They have a definite trading advantage
I see a lot of conversation on the Internet about the need for a trader to develop an advantage and define it. And, if I’m honest, most of what I’ve read is pretty alarming.
No wonder so many traders struggle to understand what an advantage is and how they can develop their own.
So what exactly is an advantage in trading and why is it important?
Advantage is everything related to how you trade that can help put the odds in your favor.
It is a combination of the time frame in which you trade, the price action strategies you use, the key levels you have identified, your risk/reward ratio and other factors. It even includes your pre- and post-trade routines.
What do you do when you win? These are all the things that make up your trading advantage.
Think of it this way:
What allowed Brazil to win so many World Cups?
It was multiple factors coming together. Brazil had the “total package,” as they say. It was their passes, imagination, dribbling skill, ball movement, and prepared plays that gave them an edge over other teams.
To be successful, your trading is no different.
Although there are dozens of factors that can form your advantage, you don’t have to master them all at once. You also don’t have to master them all before you can start putting the odds in your favor.
It is better to master a set of factors and then slowly expand to others to further define your approach or style. Not only is it a natural progression, it’s the preferred way to learn.
Have you heard the saying, “the best of all, the master of none”?
If you try to master many of these factors at once, you are preparing to be good (not excellent) at many things. That’s not what we want.
Instead, master one thing at a time. For example, become an expert in identifying key levels. Then expand your skill set by learning to determine the strength of trends. After that, focus on learning about candle configurations.
Continue to expand your skill set in this way and you will soon have your own trading advantage.
The key is to address only one or two factors (maximum) at a time. Using a slow and steady approach will keep you on track to become a successful Forex trader over time.