In virtually every profession or vocation, there seems to be those who are head and shoulders above the rest. You may be tempted to believe that this seemingly universal truth is a matter of mere happenstance. To the contrary, certain habits can make the difference in your achieving outstanding success or remaining in the clutches of mediocrity. What habits can help to make a highly effective FOREX trader?
1. Continuing to Learn
Foundational to success in any area is getting fundamental knowledge to understand the operational environment. Currency trading is no different in this respect. It is especially critical in this field that traders learn the market, noting its environment, component elements, behavior, trends, risk factors, role players and other idiosyncrasies. Beyond the initial and fundamental learning, an effective trader will seek to broaden his or her horizons with new information and tools to take trading to the next level.
2. Taking Reasonable Risks
The FOREX market is not only fast-moving in comparison to other markets, but it also may involve a higher degree of risk. To the untrained and the greedy, the risk-prone currency market becomes a voracious vacuum yielding disastrous results. However, managing the associated risks with a good trading plan, controlled execution, disciplined trading activity and proper capital preservation techniques can put you on the higher road to profitability.
3. Controlling Emotions
You, like virtually all traders, will eventually suffer a loss, whether large or small. How you handle your losses—and quite frankly, your wins—can make the difference in the success of your overall trading career. A great trader masters his or her emotions, not letting them take over. While emotionalism may tend to quickly manifest in the face of a crisis or near crisis, survival is often made possible by clear, rational and cool thinking. Overreaction throws rationality out the window and may worsen an already bad situation or take you out of the game altogether.
4. Refraining From Indiscriminate Trading
Just because you can trade does not mean you must always be doing so. There are times when it is absolutely necessary to stay clear of the market. You may feel compelled to make a new trade in an attempt to make up losses you have recently suffered. Giving in to this compulsion under the wrong market conditions can lead to rapid ruin. This is one type of overtrading. Another type involves committing more capital to the trade than is reasonable and prudent.
5. Focusing on the Long-term
If you focus only on your short-term losses or wins, you will eventually misunderstand and misjudge the significance of the same. By focusing on the long-term, you give yourself the benefit of a more accurate assessment based on a series of trades over a period of time. It is the long-term results that define whether your career as a trader has been successful or not.
6. Understanding and Using Compounding
Compounding involves reinvesting a portion of your profits in order to grow your capital exponentially. Is compounding as powerful as once attributed by Einstein, who referred to it as the most powerful force in the universe? Whether or not this is true, compounding does indeed work to build profits faster than if you are just trading on a flat amount with each and every trade. It does not take a large rate of return—10% per month, for example—to turn a small amount into a sizable fortune. Aim for consistency.
7. Balancing Trading With Other Activities
All work and no play can lead to boredom at work. Furthermore, trading can become a very lonely workout. Every individual is different in their ability to dedicate time to a single activity. You may be a workaholic or may prefer the hours of leisure. The balanced approach of an effective trader, however, requires you to spend quality time with your family, friends, and yes, even your pets. In the end, you will want to be remembered as a decent and loveable human being, and not just a good trader.
Sandy Robinson, J.D., Copyright 2007
If you are ready to change your future by stepping into the exciting world of trading FOREX, go to http://www.winningtradersassociation.com for more information. Author Sandy Robinson, J.D. is part of the Winning Traders Association, an educational organization founded by John Beiler, President. The organization consists of a network of committed trainers and motivated traders willing to provide support to those interested in trading foreign exchange. Many of the members work from home.
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