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The question that successful people get asked the most, regardless of their occupation – actors, artists, professional skateboarders, what have you – is arguably: What makes you good at what you do? Same goes for forex, and this question is equally difficult to answer. Business savviness and the ability to ‘’feel the pulse’’ of the market will only take you so far. For this reason, we have decided to compile a list of traits we believe all traders who want to break the market at some point should develop. Here are the four traits you need to develop to become a successful trader.
A Willingness to Learn From One’s Mistakes
In a highly specialized trade such as forex, egos are big – and for good reason. It takes gut to invest your hard-earned money into an opportunity that everybody seems to have missed.
However, behind every successful trade or smart investment is a story of repeated failures and painful learning experiences. In order to survive in the forex market, traders must have the willingness to learn from their mistakes. In the words of Ray Dalio, founder of Bridgewater Associates and one of the most successful hedge fund traders in recent history, ‘’it is acceptable to make a mistake, but never acceptable not to learn why or how you made the mistake’’.
So, what are some of the best techniques to learn from your mistakes? Here are a few guidelines to support this trait’s development:
- Keeping detailed records and journals of your trades, thoughts and Write down everything forex-related, whether you deem it relevant or not.
- Be willing to receive or seek feedback for your trading efforts. You would be surprised how many traders are willing to help others.
- Try to be as objective as possible when it comes to assessing your own If this does not work, go back to the previous tip for help.
- Always keep an up to date development plan.
Grasping Risk and Money Management Techniques
There is no secret that forex traders handle a lot of money on a regular basis, which could lead some beginners to take all of their finances for granted, wasting resources on trades with no chances of success and whatnot. However, successful traders treat their trading activity as a business. And similar to any other business, it is quite silly to go in without being sufficiently liquid.
Running a successful business requires careful and tight management of costs and expenditure. Good traders do not throw all of their money into one venture – they try to diversify their portfolio as much as possible in an attempt to mitigate potential losses. But, to be fair, money-management is arguably one of the most boring aspects of forex – but it is a crucial aspect that should carry as much weight as everything related to trading. Here are a few tips for proper money management:
- Develop a strict and structured approach to trading.
- Take risk-reward ratios into account before launching a trade.
- Size trades according to risk of loss.
Molding Trading Style Around your Personality
Each successful forex trader has a particular style that, throughout the years, they have carefully built around their strengths in order to offset any flaws and weaknesses they possess. Instances of novice traders sticking to trading styles way after they have achieved excellence are quite rare, so the best approach is to experiment as much as possible until you find the style that suits you best.
One of the biggest mistakes that beginners make is choosing a style that they think may work best rather than one that suits their personality. This will never work, because those styles have been honed after years of experimenting and trial and error. Here are a few tips that will help you develop this trait:
- Set realistic goals that you feel will test your strengths and weaknesses.
- Try to have a generous amount of self-awareness.
- Again, you must be open to receiving feedback.
Exercise Humility and Keep Your Ego Under Tight Control
This is a tricky aspect, as just about every major story of financial collapse – the fall of LTCM, the Enron scandal, the collapse of Lehman Brothers after the financial crisis – can be attributed to excessive bouts of human egotism and a total disregard of market realities. While, admittedly, you are unlikely to cause the biggest financial crisis since the Great Depression with a few risky trades, ego and pride can lead you to commit some horrendous trading mistakes.
One of the greatest mistakes traders make is letting their skills and views of the market to become intertwined, or even part of, their egos. This leads us back to our previous point, as an unwillingness to learn from one’s mistakes is symptomatic of a person who lets ego get the best of themselves. So, what can you do, concretely, to prevent this from happening?
- Do not fall into the trap of perfectionism. Instead, be an optimalist who admits to flaws.
- Do not impose your ego on other people.
- Be open to new experiences and learning new skills – the more willing you are to learn new stuff, the less likely you will be to fall victim to your own
- Do not project your own failures and feelings regarding the forex market onto others.
You should now be ready to start trading. Remember, Forex is certainly not as easy as some people make it seem. Beyond the steep learning curve associated with learning how to read graphs and using tools, there is another factor that prevents traders from achieving their true potential – themselves.
Ego, greed, an unwillingness to learn from one’s mistakes are all factors that could negatively affect your chances of success. And while there are many other traits that we did not have the space to cover, these four are enough to get you started on your journey to becoming a successful forex trader.
This post is sponsored by Admiral Markets.