What are the five top things I need to possess to make it as a successful Forex trader? That’s the question on every hopeful beginner’s tongue. The answer is, of course, more complicated than one response can provide – but here are five of the most important traits I’ve found in both myself and other successful Forex trader:
Patience
Pretend for a moment that you’re sitting in front of your computer and watching a live feed of the stock market (or any financial market, really). You see that it’s just opened and begin to watch closely. Within a couple of minutes, a number of different things happen:
- A new piece of news comes out that affects the market’s stability.
- A few companies release their quarterly earnings reports.
- The price begins to shift in one direction or another.
- Based on this initial information, you make your first trade by buying stock, assuming it will go up later.
As expected, the price of the stock goes up, and you sell it for a profit. But… did it make sense to buy that first trade? What if you had waited just another minute or two? Would you have sold too soon? What if there wasn’t any new information release about this company earnings – then would you have lost your money?
This is the problem with trading on your gut feelings: it’s much harder to be successful if you’re basing every decision around how you feel about a price at any given moment. The best traders are those who take their time, do thorough research before making an informed trade, and understand that there’s no such thing as a sure bet.
Discipline
One of the two components to successful trading is patience, and the other is discipline – and this ties directly into the first one: if you don’t have the patience to wait for your information and conduct your research, then you won’t be able to show discipline by following through with your decisions no matter what.
A common saying within the Forex community is that “your first loss is your best loss” – meaning that if you lose a trade, it’s better to take the loss and move on from it, rather than trying to make up for lost money by taking more risky trades.
Emotional management
The reason that discipline is so important in trading is that your emotions will be tested every time you open a new trade; no matter how much research you perform, there’s always the chance for human error – and if you let your fear or excitement cloud your judgment, this could lead to an emotional mistake.
The best traders are those who can keep any emotional response in check so that their actions are always rational – much like someone playing poker.
Knowledge
Starting, I thought that you needed to be a math genius to be a successful Forex trader. While knowledge of numbers is important – it’s just as important that you understand how and why certain events happen in the financial markets.
Not only will this help if/when your strategy changes, but it also gives you more confidence in your trades by knowing that you’re making rational decisions based on a mixture of research and knowledge.
Intuition
There’s no way to measure intuition, but it still plays a role in trading – even though the best traders are those who work hard to get all of their research done before making a move. Even if you have all of your information and enough patience to wait for the right opportunity, sometimes you know that it’s a good time to take action.
If you’re not one for numbers (like me), then this is where your intuition comes in; if you trust your gut feelings, make sure to incorporate them into your decisions as well – but don’t let them override your rationality.