5 Habits of the Successful Forex Trader

We’ve already covered the top forex trading tips for beginners and some common trading mistakes to avoid, but what else do you need to know to be successful? What is it exactly that sets successful traders apart and can you replicate that success? While there are many formulas to success and each trader approaches the financial markets with his or her own trading style and personality, there are certain common characteristics that make successful traders win where others have lost (one of those characteristics is “Don’t be afraid to lose”).

Like many areas of life, becoming good at trading requires a degree of talent and hard work. But while some may have an innate “eye for the market,” no amount of talent will replace the hard work needed to build up the necessary skills, which require practice, discipline and motivation to succeed even when you fail. As the famous quote says, “Hard work beats talent when talent doesn’t work hard.” Developing these five habits will ensure that you are well-equipped for the many trading challenges and help you perfect your craft.

Preparation

Before any trading is actually done, proper preparation is key to any future success or failure. This includes both analytical preparation such as setting goals and having a good trading plan in place that takes into account current market conditions, and also psychological preparation. Trading can be stressful and require many hours of concentration, so make sure that your head’s in the right place. You also don’t want to go in blind, so make sure that you are well read and aware of all financial developments. All in all, knowing what methodology you’re going to use and sticking to it will already set you apart from a majority of haphazard and underprepared traders.

Patience

One of the reasons many people are drawn to forex trading is its fast pace and record level of activity, but being a successful trader also involves great amounts of patience. Waiting for the right moment to enter or exit a trade as envisioned by your trading plan may sound simple enough, but too many people let impulsivity guide them or make the wrong move when the market doesn’t immediately react as they want it to. New opportunities will always be there for those who are prudent. It’s important to note, however, that patience does not mean stubbornness, one of the hallmarks of successful trading is the ability to reevaluate and adapt to changing conditions.

Discipline

Being patient, as well as a great deal of other integral habits, first and foremost requires discipline. A disciplined trader is one who doesn’t let spur of the moment emotions or pressure take over them, instead these traders believe in their trading system and are disciplined enough to follow it even when price action isn’t always as you’d hoped. Making correct decisions requires discipline, even if it means getting out of unfavorable trades when a part of you wants to stay in against your better judgement. Discipline also requires a certain level of emotional detachment, instead relying on your rational side and what you know to be correct, rather than what you want to be correct.

Fearlessness and Persistence

No matter how many of the successful habits you have or how “correctly” you do everything, at one point or another - you will lose, it is the only guarantee. This could be big losses or small losses, but the successful trader doesn’t let it stop him, instead he learns from it. All successful traders have experienced big losses in their past (even trading giants like Stanley Druckenmiller have lost big), but what they do differently from traders who are always losing is prepare better, be patient, and use discipline to avoid such losses in the future. They also embrace small losses and accept them as part of the balance, which is key to managing your risk.

Risk Control

Ultimately, successful trading is all about risk control. It is a fine balance between taking a risk to gain while facing the possibility of loss on each trade. Successful traders know this and utilize risk management strategies to minimize potential losses while maximizing profits. Make using stop losses such a habit that you don’t place a trade without it, no matter how sure. Successful risk management does not mean avoiding losses completely, it means minimizing their impact so that no single loss will hurt your overall trading balance or capitulate your capital. To win big you must often risk big, but successful traders instead know when such a risk is good enough in their favor to take it.

Final Words

The best way to have a successful trade is to get everything right straight off the bat (preparation), of course, but the second-best way is to reevaluate your trading system, readjust, and try again. It may be only on your third or fourth attempt that your trade will move in the correct direction, but this practice requires as much patience and discipline as getting everything right the first time, and will probably teach you more in the process. Most importantly you need to be self-analytical and truthful with yourself, to realize when you need to work on your own shortcomings and which of these habits you already have, and which you need to incorporate to be successful.

While you work on yourself, practice with $10,000 in virtual currency or open an account to start trading now.