What Separates The Best Forex Traders?

What does it take to be a successful trader?
What does it take to be a successful trader?

Many people try forex trading, but not everyone becomes a forex trading mogul earning massive profits.

Having worked in investment banking for a number of years, I had ample opportunity to observe those traders who were consistently profitable as well as those who weren’t. Such traders typically have short professional careers.

Some people fail to get the information and education they need to succeed, or they don’t get the right systems in place to help them. Many of these difficulties can be overcome simply by setting-off on the right foot early on.

Let’s take a look at what separates the best forex traders from those who give up on a loss.

The Right Attitude

It takes experience to become a truly exceptional forex trader. This is something you can only get if you approach forex with the right attitude from the very beginning. Having the right mental outlook is just as important as technical knowhow.

The internet is full of people who’ve made bad trading decisions, whining about their trading software when it was their lack of knowledge or judgment that caused them to fail.

Dedication: You need to be dedicated. At first, in learning the way the market operates and, subsequently, how you go about making successful trades. If you want to be able to make the most profitable trades you’ll need to be patient and follow a disciplined approach.

The right approach is essential
The right approach is essential

Too many people make rash forex trading decisions, especially if they think they’re on a roll.

Keep up to date Make it a habit to study the financial news so you know what is happening in currency markets globally. While the global forex market is often highly volatile, macro-economic conditions tend to drive long term trends in currencies (see here for a brief overview) – such trends can be far more predictable than inter-day price fluctuations.

Most online brokerages (read more about brokers) provide news feeds as well as their own analysis – but setting up your own electronic news alerts from the major financial publications (Reuters, Bloomberg, the FT as well as specialized news channels) can be helpful.

Staying informed can give you an edge, but many beginners neglect this aspect of currency trading and focus almost entirely on charts and technical indicators. Whilst technical analysis is highly influential in forex, the release of key economic data can throw a spanner in the works of even the best technical strategies.

While personal trading styles may differ radically, the most successful traders have certain key traits in common:

A cool mental attitude: Many inexperienced traders are completely unprepared for the mental challenges they’ll face. Fostering the right mental attitude is key to success in any trading program.

A disciplined and methodical approach: Having the confidence to follow a strategy in a consistent manner.

Willingness to accept and learn from mistakes: Successful traders critically analyze any losses and revise their strategy where appropriate.

Thinking “out of the box”: While having a “follow-the-heard” mentality can make profits in the short-term, the odds are stacked heavily against this approach over the long-run.

The Right Software

Forex software is powerful, but it should never be seen as a substitute for knowledge from an experienced trader.

Bots While there are some forex robots that are inefficient and don’t keep up to date with the developing market, most forex software will work as long as the trader controls the software appropriately, setting the controls to match the market.

The internet is full of people who’ve made bad trading decisions, whining about their trading software when it was their lack of knowledge or judgment that caused them to fail.

If you find yourself relying completely on your software to make trading decisions, ultimately you should ask yourself if you’d be better-off taking a hands-off approach and investing in fully managed system.

While less exciting, this approach can be far less stressful and time consuming.

Forex software is powerful, but it should never be seen as a substitute for good “know how” from an experienced trader. Getting to that point means starting from the basics while familiarizing yourself with the software.

Make sure you know how it works: No matter how experienced you are, you should make an effort to fully understand the trading system of the software you choose. Without doing this, you will massively increase your chances of failure as you will likely find your lack of understanding hits at the wrong time.

You also risk deploying a trading system that’s entirely inappropriate for your risk appetite and investment objects.

Taking Action

Timing is critical: Making sure you’re ready to make the trades, at the right time, is key. Making trades at the wrong time is very common, and it’s easy for an inexperienced trader to do. People tend to either delay too much, missing an opportunity, or get too carried away making rash trades which are rarely profitable.

To take the right action at the right time means being cool, calculated and rational. You should use your software to help your forex trades, but don’t forget the importance of the human mind.

Take responsibly for your actions: Remember that if you do make a mistake, it’s a powerful opportunity to learn. Use it as a chance to review your techniques, but don’t let it tear apart your confidence. Just make sure you don’t make the same mistakes time and time again. Don’t pass the buck on to the forex software or the market.

Being an action taker is the key to success: Take action to learn the market and the patterns of trading, and you’ll develop that forex expertise that will drive you forward.

If you take these three tips into account you will be well on your way to becoming a successful forex trader. There will still be plenty to learn – you never really stop learning – but you will have done more than the majority of people who consider starting currency trading.

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About the Author

Steve Connell has spent over 17 years working in the finance sector as a trader/market maker and strategist. Over that time he’s worked for several global banks and hedge funds. Steve has a unique insight into a range of financial markets from foreign exchange, commodities to options and futures.

1 Comment
  1. Hi steve I love your articles very straight forward. Never beat around the bush. Steve I have a couple questions regarding hedge fund. I want to start my own hedge fund, but dont know much on how and what to do. If we can connect or you could answer my question it would be very helpful. Thank you

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