When it comes to brokering on the Foreign Exchange market, the wrong mindset can stand to lose your entire investment. The golden rule for FX traders is to work on proven strategies. Never go into a trade blind sighted by the returns, and instead, do your due diligence prior to placing a trade.
That requires patience and time dedication to understand the market.
In order to understand the market, there are four skills in particular, which will help you make the most profits, by trading currencies in the Foreign Exchange.
The 4 essential elements of a successful Forex Trader
When you’re trading currencies, the data you’ll be analysing is presented in charts. To the inexperienced eye, the data is worthless, so you need to first understand the charts, and develop your own technique to study the trends and patterns, presented by the charts.
This is the stage of technical analysis. The better you can understand the data presented, the more effective decisions you can make, in terms of whether the trade is worth taking, or moving onto another currency pair, and analysing those.
Most successful FX traders are proficient with their technical analysis, and then combine that with certain indicators, to predict a profitable trade, based on the systems they are using.
Or money management for a better word. To be successful you need to manage the funds in your account proficiently. Regardless how profitable you think a trade is going to be, you have to have discipline to stick to reasonable investments.
Put too high a stake on each trade, and the market swings, you can and probably will wipe out your entire account balance fast.
The best thing you can do is work with a percentage of your account balance, so that you have money available to invest in your trades, while retaining sufficient funds for future opportunities.
Developing Discipline to Your FX Trading Strategies
Most successful in the FX trading profession will have their own entry and exit strategies, based on their financial objectives. Once you develop a trading strategy, you’ll have to be disciplined to stick to it. There are going to be times when you can experience rapid losses in quick succession. That can raise doubt about the strategy you’re working with.
It could be that you’re trading strategy isn’t effective, but you will need to use one, tweak it occasionally, and at least apply it for a few months, before you change it, if it has worked for you before.
Any new strategy should be tested on test accounts, without risking your own capital, or the capital of an investment firm.
Once the strategy is working on the test account, then try it out on a live trading account. When it turns out profitable, don’t falter away from it.
Losses are expected in some of your trades, but so long as you have more profitable trades, in comparison to your losses, then you’ll need to be disciplined enough to have faith in your strategies, technical analysis, and disciplined to stick to your budget, it’s more probable that you’ll experience more success.
Don’t underestimate the power of personal discipline.
Mental Mathematic Abilities
The Forex market moves fast, and works around the clock. If you’re trading on short-term spreads, you’ll need good mental math skills to work out your potential profits and losses. Small movements can be just as profitable as the larger ones, and make the most, FX traders will often work with short, medium, and long term investment strategies.
Currencies are presented to you in pairs, which can be confusing, when the two numbers are presented side by side.
Good math skills will let you calculate potential profits and losses faster, while also helping you work out the amount you can invest, based on your budget. That should be based on a percentage of your overall account balance, in line with your money management skills.
Developing and sticking the skills outlined above, will set you in good stead to become a successful FX trader. It will take time, but the rewards are well worth your time investment, to develop the skills needed.