Characteristics of a Good Forex Trader

·       High level of discipline, patience, and self-control to implement the trades 100% free of emotions, and without second-guessing.

·       Never risking more then 5% of trading capital on any one trade.  (This means that if you have a $10k account, to never risk more then $500 on any particular trade which is approximately a 50 pip stop loss).

·        A strong innate drive to improve and develop trading skills on an ongoing basis.

·        An understanding that having a brilliant trading method alone is not enough to make you successful.  It takes patience and determination in order to perfect your trading skills.  Most of all, it takes discipline, self-control, and good money management skills.

·        The goal and focus are to trade the method right away.  Your focus should not be on how much money is being made or lost on each trade.  You must develop a faith and understanding that, if the method is implemented the right way, the money will come.  Initial wins should never generate a feeling that the markets are “easy” to figure out.  When winning, do not allow yourself to get overexcited and, when losing, not getting depressed.

·        Not taking wild risk.  Always stick to the plan.

·        A losing trade should not create a fear of the markets causing you to not take the next signal.  Good trades are often missed as a result of fear from prior losing trades.

·       Very aggressive trading should not develop when missed opportunities are realized, resulting in bad trading strategies, strange ideas, or second-guessing the method. 

In forex trading, it would be foolish to expect to be right every time.  As a trader with the proper forex trading techniques, you should be able to cut losses short by having stop losses and allowing profits to run.  The basic failing of unsuccessful traders is that they limit their winnings and allow their losses to run hoping for a comeback. 

Amateur traders hate to admit they’re wrong, therefore they will often let their loss ride, becoming larger and larger in hopes that eventually the market will turn around and prove them correct.  Then after a while they begin to hope for a small loss and give up hope for a profit.  If you cannot afford to lose a trade every once in a while (psychologically or financially), you cannot afford to win either. 

If you are implementing the trades correctly and get stopped out every once in a while, you must consider that it as simply a cost of doing business and not a loss, and do not hesitate to trade the next signal.  Whether the trade is a winner or not, once the trade is covered, it’s over, go on to the next signal.  It’s difficult to put your previous trades out of your mind, but if you do, your chances for success will be much higher. 

When trading forex, do not think about the money, just make sure to implement the trade correctly, then money will come. 

Trading is 10% technique and 90% mental.  Obviously, you must use a technique that works and you must learn the basics of trading.  But beyond that, if you are not doing well, you are most likely fighting with yourself, not the market.  The market is always right.  It basically comes down to how we deal with and feel about losses.  One trader may be afraid to trade the next signal; another trader may get angry and try to get even with the market, etc.  The result is both of these traders will never have success unless they become 100% emotionally detached from their trades and become kind of robotic.  At that point, trading will become somehow boring, but you are making a lot of profit.

 These are the Characteristics of a Bad Forex Trader: 

·        Making the same mistakes over and over

·        Executing trades emotionally

·        Becoming overconfident to the point of taking wild risks

·        Hesitating to take the next trade after being stopped out

·       Chasing the market and trying to get even after being stopped out

·        Trading with money that the trader cannot afford to lose

·        Over trading by looking for any excuse to enter the market

 Required Reading:

 “Trading in the Zone” by Mark Douglas 

·       Read The 3 "M's" You Need to Succeed As a Forex Trader.

 

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