Top 4 Things Successful Forex Traders Do

There is no single formula for success for trading in the financial markets. Think of the markets as being like the ocean and the trader as a surfer. Surfing requires talent, balance, patience, proper equipment, and mindfulness of your surroundings. Would you go into water that had dangerous rip tides or was shark-infested? Hopefully not.

The attitude to trading in the Forex markets is no different. By blending good analysis with effective implementation, your success rate will improve dramatically, and, like many skill sets, good trading comes from a combination of talent and hard work. Here are the four strategies to serve you well in all markets, but in this article, we will focus on the Forex markets.

Approaching Forex Trading

Before you trade, recognize the value of proper preparation. It’s important to align your personal goals and temperament with relatable instruments and markets. For example, if you understand retail markets, then it makes sense to trade retail stocks rather than oil futures, about which you may know nothing. It also helps to begin by assessing the following three components:

Given its low commissions and fees, the Forex market is very accessible to individual investors. However, before you trade, make sure you have a solid understanding of what the Forex market is and the smart ways to navigate it. Learn the basics and see real-time examples of the approaches and strategies detailed in Investopedia Academy’s Forex Trading for Beginners course.

Time Frame

The time frame indicates the type of trading that is appropriate for your temperament. Trading off a five-minute chart suggests that you are more comfortable taking a position without exposure to overnight risk. On the other hand, choosing weekly charts indicates comfort with overnight risk and a willingness to see some days go contrary to your position.

In addition, decide if you have the time and willingness to sit in front of a screen all day or if you prefer to do your research over the weekend and then make a trading decision for the week ahead based on your analysis. Remember that the opportunity to make substantial money in the Forex markets requires time. Short-term scalping, by definition, means small profits or losses. In this case, you will have to trade more frequently.

Methodology

Once you choose a time frame, find a consistent methodology. For example, some traders like to buy support and sell resistance. Others prefer buying or selling breakouts. Some like to trade using indicators, such as MACD (moving average convergence divergence) and crossovers.

Once you choose a system or methodology, test it to see if it works on a consistent basis and provides an edge. If your system is reliable more than 50% of the time, you should consider that an edge, even if it’s a small one. Test a few strategies, and when you find one that delivers a consistently positive outcome, stay with it and test it with a variety of instruments and various time frames.

Market (Instrument)

You will find that certain instruments trade much more orderly than others. Erratic trading instruments make it difficult to produce a winning system. Therefore, it is necessary to test your system on multiple instruments to determine that your system’s “personality” matches with the instrument being traded. For example, if you were trading the USD/JPY currency pair in the Forex market, you may find that Fibonacci support and resistance levels are more reliable.

Top 4 Things Successful Forex Traders Do

Your Forex Trading Attitude

Behavior is an integral part of the trading process, and thus your attitude and mindset should reflect the following four attributes:

Patience

Once you know what to expect from your system, have the patience to wait for the price to reach the levels that your system indicates for either the point of entry or exit. If your system indicates an entry at a certain level but the market never reaches it, then move on to the next opportunity. There will always be another trade.

Discipline

Discipline is the ability to be patient – to sit on your hands until your system triggers an action point. Sometimes, the price action won’t reach your anticipated price point. At this time, you must have the discipline to believe in your system and not to second-guess it. Discipline is also the ability to pull the trigger when your system indicates to do so. This is especially true for stop losses.

Objectivity

Objectivity or “emotional detachment” also depends on the reliability of your system or methodology. If you have a system that provides entry and exit levels that you find reliable, you don’t need to become emotional or allow yourself to be influenced by the opinion of pundits. Your system should be reliable enough so that you can be confident in acting on its signals.

Realistic Expectations

Even though the market can sometimes make a much bigger move than you anticipate, being realistic means that you cannot expect to invest $250 in your trading account and make $1,000 each trade. Although there is no such thing as a “safe” trading time frame, a short-term mindset may involve smaller risks if the trader exercises discipline in picking trades. This is also known as the trade-off between risk and reward.

Motivating Forex Trading Factors

Instruments trade differently depending on the major players and their intent. For example, hedge funds vary in strategy and are motivated differently than mutual funds. Large banks that are trading in the spot currency markets usually have a different objective than currency traders buying or selling futures contracts. If you can determine what motivates the large players, you can often align that knowledge to your advantage.

Alignment

Pick a few currencies, stocks, or commodities, and chart them all in a variety of time frames. Then apply your particular methodology to all of them and see which time frame and instrument align to your system. This is how you discover alignment within your system. Repeat this exercise regularly to adapt to changing market conditions.

Implementing a Forex Trading Strategy

There is no such thing as only profitable trades, just as no system is a 100% sure thing. Even a profitable system, say with a 65% profit-to-loss ratio, still, has 35% losing trades. Therefore, the art of profitability is in the management and execution of the trade.

Risk Control

In the end, successful trading is all about risk control. Try to get your trade in the correct direction right out of the gate. Evaluate your trading system, make adjustments, and try again. Often, it is on the second or third attempt that your trade will move in the right direction. This practice requires patience and discipline to achieve success.

The Bottom Line

Trading is nuanced and requires as much art as science to execute successfully, which means that there is only a profit-making trade or a loss-making trade. Warren Buffet said that there are two rules in trading: Rule 1: Never lose money. Rule 2: Remember Rule 1. Stick a note on your computer that will remind you to take small losses often and quickly rather than wait for the big losses.

Up to $5000 deposit bonus

Trade forex and CFDs on stock indices, commodities, stocks, metals and energies with a licensed and regulated broker. For all clients who open their first real account, XM offers up to $5000 deposit bonus to test the XM products and services without any initial deposit needed. Learn more about how you can trade over 1000 instruments on the XM MT4 and MT5 platforms from your PC and Mac, or from a variety of mobile devices.

37 thoughts on “Top 4 Things Successful Forex Traders Do

  1. I believe this is among the so much important info for me. And i am happy reading your article. However wanna statement on some general issues, The web site taste is great, the articles is really nice : D. Good process, cheers

    1. Thanks for the article, it’s really helpful, please, I need your help or suggestion on a strategy I could use that is guaranteed 70% daily profit on Crash and Boom.

      Thanks

  2. Greetings! I’ve been following your site for a while now and finally got the bravery
    to go ahead and give you a shout out from Atascocita
    Tx! Just wanted to tell you keep up the great work!

  3. My partner and I absolutely love your blog and find nearly all of
    your post’s to be what precisely I’m looking for.
    can you offer guest writers to write content in your
    case? I wouldn’t mind creating a post or elaborating on many
    of the subjects you write in relation to here. Again, awesome weblog!

  4. Great goods from you, man. I have be aware your stuff previous
    to and you are just extremely wonderful. I actually like what you
    have bought here, really like what you are stating and the
    way in which you assert it. You’re making it enjoyable and you continue
    to take care of to keep it wise. I cant wait to read
    much more from you. This is actually a terrific web site.

  5. This design is wicked! You most certainly know how to keep a reader entertained.
    Between your wit and your videos, I was almost moved to start my own blog (well,
    almost…HaHa!) Great job. I really loved what you had to say,
    and more than that, how you presented it. Too cool!

  6. Hi there, this weekend is fastidious in support of me,
    for the reason that this point in time i am reading this wonderful informative piece of
    writing here at my residence.

  7. I just couldn’t depart your website prior to suggesting that I really loved the usual info a person provide
    in your guests? Is gonna be again incessantly to investigate cross-check new posts

  8. I would like to thank you for the efforts you have
    put in writing this website. I really hope to check out the same high-grade blog
    posts from you later on as well. In fact, your creative writing abilities has inspired me
    to get my very own blog now 😉

  9. I’m extremely impressed together with your writing talents and also with the structure for your blog.
    Is this a paid theme or did you modify it yourself? Either way stay up the excellent high quality writing, it is rare to
    peer a great blog like this one today..

  10. Undeniably believe that which you stated. Your favorite reason appeared to be on the web
    the easiest thing to be aware of. I say to you, I certainly get irked while people consider worries that they just do not know about.
    You managed to hit the nail upon the top and defined out the whole thing without having side-effects
    , people can take a signal. Will likely be back to get more.
    Thanks

  11. What i don’t understood is actually how you are now not really a lot more well-favored
    than you might be now. You are so intelligent. You realize therefore
    considerably in the case of this matter, made me personally believe it from so
    many numerous angles. Its like men and women don’t
    seem to be interested unless it is something to accomplish with Woman gaga!

    Your individual stuffs nice. Always care for it
    up!

  12. I love what you guys tend to be up too. This sort of clever work and reporting!
    Keep up the good works guys I’ve incorporated you guys to my own blogroll.

  13. Howdy! I’m at work surfing around your blog from my new iphone 3gs!
    Just wanted to say I love reading your blog and look forward to all your posts!

    Keep up the excellent work!

  14. Just desire to say your article is as astounding.
    The clearness on your publish is simply great and i could think you’re
    knowledgeable on this subject. Well together with your permission allow me to
    grab your RSS feed to keep up to date with drawing close post.
    Thanks 1,000,000 and please continue the gratifying work.

  15. Simply wish to say your article is as astounding. The clarity in your post is just
    excellent and i could assume you are an expert on this subject.
    Fine with your permission allow me to grab your RSS feed to keep updated with forthcoming post.
    Thanks a million and please continue the enjoyable work.

  16. Hello! I’m at work browsing your blog from my new iphone 4!
    Just wanted to say I love reading your blog and look forward to all your posts!
    Keep up the great work!

  17. Howdy! I simply wish to offer you a huge thumbs up for
    the excellent information you have got right here on this post.
    I’ll be coming back to your web site for more soon.

  18. Generally I don’t learn post on blogs, but I wish to say
    that this write-up very compelled me to try and do it! Your writing taste
    has been amazed me. Thank you, very nice post.

  19. I must thank you for the efforts you have put in writing this blog.
    I really hope to check out the same high-grade content from you
    later on as well. In fact, your creative writing abilities has motivated me to get my very own site now 😉

  20. Hey there! Would you mind if I share your blog with my zynga group?
    There’s a lot of people that I think would really enjoy your content.
    Please let me know. Thanks

  21. Hmm it looks like your site ate my first comment (it was super long) so I guess
    I’ll just sum it up what I wrote and say, I’m thoroughly enjoying your blog.
    I as well am an aspiring blog writer but I’m still new to everything.

    Do you have any tips and hints for inexperienced blog writers?
    I’d definitely appreciate it.

Leave a Reply

Your email address will not be published. Required fields are marked *