When it comes to successful forex trading, a positive trading psychology is paramount. You need to adopt a trading mindset that allows you to master your emotions, remain calm, confident, focused and free of fear and anxiety so that you are able to act and react in your own best interests no matter what the market throws at you.
One of the biggest psychological hurdles many new forex traders face is learning to accept losses as a necessary part of the game. This runs against how most of us are wired as we are conditioned to believe that losing is bad and equates to failure as opposed to winning which is good and equates to success.
Ironically, it is the best loser that wins the game of forex trading over the long-term.
Another barrier to success is impatience. Inexperienced traders tend to feel that they always need to be trading and that if they are not trading then they are missing out on opportunities to make money. This is far from the truth. In fact, I know several professional traders that trade only a handful times per year who make millions.
It’s important to remember that we only trade when the conditions align with our trading plan. This requires discipline. One thing that may help is the realisation that being on the sidelines is in fact, a trading decision, a position even.
Impatience also tends to breed greed and greed breeds recklessness. The leverage that is available trading forex is unmatched in any other market. The ability to control millions of dollars of currency with only a small deposit can result in huge financial gains. However, this leverage is a double-edged sword and if you are trading any more than 5% of your capital at any one time, then you are setting yourself up for disaster.
I’ve seen rookie forex traders get impatient, greedy and reckless and quickly blow up their accounts because they tried to trade 10 standard lots on a $5000 account. I don’t need to tell you that at around $100 a pip exposure on such a small deposit, it only takes a blip to blow up your account.
If you want to succeed as a forex trader you need to take a long-term view, be patient, stick to your trading plan diligently and manage your money like it is your Grandmother’s life savings.
If you can do this well, even though you will endure consecutive losses which will test your resolve, as will as winning streaks that will stroke your ego dangerously, then you have a chance at making it as a professional trader.
Lastly, think of trading as a business. Every successful business has a plan, strategies, tactics that evolve with the market conditions as well as strict financial controls. As a trader, you are the CEO of a business and as Captain, you must steer your ship safely through the oftentimes torrential waters of global finance so that you may survive long enough to find the treasure you seek.
Forex trading can be the most rewarding adventure of a lifetime, or it can be your worst nightmare. Do you have what it takes?