The forex market is an excellent source of earning money from home as it does not require any entry barriers. However, most of the retail forex traders lose money in the forex market. Therefore, to be successful in the industry, it is essential to know how successful forex traders think and trade.
10 April, 2020, | AtoZ Markets – The foreign exchange market operates transactions for more than 5 trillion dollars every day. This market revolves around fluctuations in the price of currencies like the US Dollar, the Japanese Yen, the Euro and the Pound. There are more currencies, and on many occasions, big players have changed their fortune by trading with them.
In this article, we will see how successful forex traders think and trade.
How do Successful Traders think about the Forex Market?
Many traders have earned a lot of money from the Forex market. As this market is decentralized, people around the world can draw their systems without any interventions or manipulations.
#1 Successful Traders don’t Lose Money
No Forex trader did not make any loss in his life. However, there is a difference between the failure of a beginner trader and an expert trader.
What’s the difference?
The difference is the mindset.
Most of the new traders consider making losses as a bad thing. Therefore, after making a loss, they start to think that they did something wrong. Consequently, they move to another trading strategy, and when they find it unsuccessful, they move to another.
On the other hand, successful traders do not consider making a loss as a bad thing.
Stop-loss usually tells something about the market. As we know, the forex market is full of uncertainty; any stop-loss may indicate the further aspect of the market.
In the forex market, no one wants to see a trade to go against him. It doesn’t matter whether you try for a month or years; it is always enjoyable to see a profit rather than making losses.
Successful forex traders believe that the stop loss is a feedback of the market. In the forex market, the situation might change after entering the trade. Therefore, after hitting a stop loss, it is an indication to think about what to do in the next. Successful traders use the loss as a powerful tool to learn.
How is that possible?
If your trading condition appears you enter the trade, but the rest of the things are up to the market. So after hitting the stop loss, you can check whether you followed your conditions or not. Therefore, next time you make a loss, you will find it as constructive feedback. You can analyze the situation to know how you can improve next time. You should remember one thing that your A+ trading setups might go wrong.
#2 Successful Traders Use Price Action
Every successful forex trader uses price action in their trading strategy. However, using a price action strategy does not mean that all successful forex traders are using the same trading strategy. The use of the price action might be different for all traders.
Some traders use raw price actions where other traders use price action to identify the key levels in the market. Overall, the price action plays a vital role in the trading strategy.
As we know, the forex market is the world’s biggest financial market, and most of the participants in the forex market are Central Banks and large financial institutes. Therefore, traders must understand what big players are doing in the market. Price action is the footprint of big players’ intervention in the market.
So whether you use a candlestick based strategy or indicator-based strategy or even in the naked chart, you should understand what the big players are doing. Therefore, price action is a way to measure their footprint.
#3 They Have a Defined Trading Strategy
We know that there are a lot of participants involved in the forex market and we are just a small part of them. There are thousands of trading strategies available in the world. Moreover, there are lots of great trading strategies from world-class economists, mathematicians, and financial giants.
Thousands of trading strategies look at the market in thousands of ways. Therefore, it might be confusing to change the strategy very frequently. Every trading strategy has strengths and weaknesses. You have to follow a specific trading strategy and identify where to use it and where to sit back and see the market. This is what most successful forex traders do.
Being a successful trader does not mean you have to make a profit every day, or you have to make a profit in every trading session. There are a lot of self-traders who become a millionaire just by following a simple trading strategy using the moving average only. The main thing is where to apply the strategy and to do it correctly and repeatedly.
For example, if you are a trend trader and you observed the market that it is going through an impulsive bearish pressure. In that case, your trend trading strategy will go well. All of your sales might have a higher possibility to hit the take profit. However, most of the time, the forex market remains in the range. So you should identify where the trend starts and when it is in range to avoid the situation.
#4 Successful Forex Traders Don’t Try Too Hard
Forex trading is the industry where you need to ensure consistent profit with regularity. Doing hard work does not mean you need better results in your next trade. In the forex market, you need to understand when your trading strategy will work well.
If you see the market is in a range and you try to follow the trend trading strategy you will fail. Therefore, doing hard is sometimes not necessary when the market condition does not allow you.
Moreover, having a trading strategy is very important. Therefore, after identifying the trading strategy, you should understand the strength and weakness of it. If you don’t go through the trading strategy well, you will not be able to implement it to make a consistent profit. As a result, you will change the strategy very frequently and will end the trading career with a loss.
So what does hard work mean in the forex market?
The hard work in the forex market means you should work through your trading strategy with a lot of backtesting and practicing in the demo account or with smaller deposits. The next hard work is to acquire strong trading psychology. To be a successful trader, you should have strong trading psychology where most of the retail traders still struggle with greed and fear.
When they see the market is moving towards their direction, they become greedy, and they add more positions to it. Moreover, when they know the market to go against them, they fear and cut losses. On the other hand, a successful forex trader does not care what the market is doing. They always stick to their trading strategy and any failure of the strategy indicates a sign of the market.
#5 They Think of Risks
Risk management is essential for forex traders that distinguishes between successful and unsuccessful traders in the industry.
Successful forex traders use the amount that he can afford to lose. Therefore, it is not wise to invest money using your credit card for taking a loan from another person. The pressure of loans would increase further stress on your mentality, and you will likely make wrong training decisions.
Moreover, in the price chart, you should not risk the amount that is smaller than the reward. Successful Forex traders always make sure that their reward is higher than the risk in their every trade.
Another part of risk management is that after taking the trade, you should minimize the risk as soon as it appears to be profitable. For example, if you are a price action trader and you saw the price break the critical support and resistance levels towards your desired direction, you should move the stop-loss at break-even to minimize the risk.
As we know, the forex market is very uncertain, and your running trades may likely come back and hit your stop loss.
If you ask yourself how to be a successful forex trader, after reading how successful traders think and trade, then look no further. If you look at the similarities of all these in you, you are ready to do something great. The motivation of successful traders allows them to stay disciplined and focused on long term success. They found it interesting, and they worked in the right way. So their primary focus would be to:
- Risk management strategy
- Don’t be afraid
If we can learn these things, then we may just be one step closer to our remarkable success.
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