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What makes a successful forex trader?

Posted August 2, 2012 by Elizabeth Goldman to Investing 0 0
This post was written by a EasyFinance.com Community member. The views expressed below may not reflect the views of EasyFinance.com.

One thing that successful traders have in common, despite the incredible diversity in markets being traded, is they all have a particular strategy or view that they have discovered works for them in generating profits.

Trading mantra
If you compare financial markets and the relative price movements to a coastal tide, they both rise and recede throughout the day and the seasons. Knowing that this is how it has always worked and adopting that frame of mind will allow you to take a more selective approach and not rush in to try and grab a quick profit as there will always be other opportunities that present themselves. It is always best to try and remain humble as well, in other words if the assumptions you made about a market are proved to be wrong, be prepared to accept this fact and take your loss without further delay, not accepting you have made a bad call will cost you money so try to remain humble.

Take advantage of rules without bending them In the US particularly, there have been a raft of new regulations relating to spot Forex and understanding these rules will allow you to exploit potential opportunities. The concept known as Offsetting is when you identify a trending move and then stay with it until the trend starts to reverse. It is now within the rules for a trader to enter the pull-backs which essentially gives you the ability to profit on the corrections whilst also riding the wave of the trend. This situation allows you to hold multiple positions both up and down price and gives you a greater chance to generate a profit.

Top middle or bottom
One sound piece of advice about the strategy of trying to identify the top or bottom of a price run is don’t do it! Many traders make fundamental errors in chasing what could turn out to be modest bargains and the smart traders always spot a potential trend but are happy to join in the party once it is in full swing rather than try and indentify the beginning.

Maintain your discipline
Successful traders create a series of rules and criteria and they will only invest when these conditions are met. Whilst they may miss out on the odd profit opportunity as a result of maintaining this disciplined approach they will also avoid the temptation of exposure to potential losses. Never be afraid to pass over a situation that breaks your rules as there will always be similar situations occur that do qualify as long as you maintain your discipline.

Always use stop losses
Even if you feel that you do not need this safety measure and even if the trading system that you are using does not need stops, always still use the facility as a vital safety measure. A sudden volatile movement in the market can make a substantial dent in your trading account balance, so you should always apply a stop loss in order to preserve your capital.

Protect your health and wealth
When you start out and use a demo mode to practice your skills it is easy to consider that you have found a profitable market and when you trade for real, you suddenly find it harder to make a profit. This is primarily because your attitude to risk can be altered when you are not trading with your own real money. Successful traders only ever speculate with money that they can afford to lose because the stress and pressure of having to make a certain amount of money each month to cover your costs if you use funds that you need elsewhere, will affect your discipline and potentially cloud your judgement.

About Elizabeth Goldman: Liz Goldman is a freelance forex and investment writer who discusses trading strategies and future economic indicators. She contributes to leading finance communities across the web and she also tweets.

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