Trading can be a difficult business if not dealt with properly, it’s easy to lose your money all in one go and unfortunately for all the math whizzes out there, there is no complicated, quantitative formula that can be used to attain success while trading, to really get a deeper understanding of trading - especially forex trading- you must break down all its key components that are far from quantitative and try to fit and apply them to all the practical situations you face as a trader.
1. Expertise in Trade Entry
It is wise to always have a strategy before entering a trade otherwise you’re likely to get slaughtered. Many forex traders fail simply because they don’t think strategically beforehand, the key to thinking strategically however is to not plan everything to the point.
There is such a thing as too much planning, if you combine two or more strategies and try and cram all that into your brain, you’re likely to fail. Instead, opt to perfect just one strategy so flawlessly that you won’t need to know anything else. It’s good to note your strategic plan down or make bullet points, being prepared is essential and going in, unprepared is forex trading suicide.
2. Qualities of a Good Trader
All the trading you do is dependent on what kind of a person you are; forex trading is a personality quiz of sorts and to be a successful forex trader you need to possess the qualities of an innovative thinker and leader. Discipline is something without which no trader can ever be successful, discipline entails that you can’t be constantly interfering in your trades after you enter them.
After entering a trade you should sit back and watch it all unfold rather than going back and forth and playing around on your end. Too much interference will only create complications and all good traders know- complications can easily cause you to lose money.
Patience and discipline go hand in hand; a successful forex trader has the patience and ability to wait for the best trades rather than going into unpromising trades without thinking things through just for the sake of doing something.
3. Managing Finance
It is vital, that as a trader you know what you’re getting yourself into (financially) before entering a trade, it’s important to know your limits and your budget so if a trade does go wrong somehow, you can manage and not go completely bankrupt.
You must decide before hand what you’re going to be risking per trade, and be completely certain of this amount, you must make sure that this amount is low enough for you to enter more than just one trade, only then will you be able to watch your trading strategy do it’s magic.
You need to also make sure that if you make a profit, you don’t sustain it in your trading account for all of eternity, it’s important to withdraw most or half of it so that there’s a smaller chance of you giving it back to the market.
4. A Well Thought Out Exit Strategy
A well thought out exit strategy is almost as important as having a good entry strategy, if not more so, most traders tend to go into trade with a thought out, elaborate plan but when it comes to exiting the trade they tend to just go with whatever they feel is ‘right’ at the moment this could greatly influence how much profit the trader gets to take away with himself.
The right exit strategy is solely dependent on the market conditions and the trends that are being followed at the time of the trade. And it’s vital to have a proper exit strategy to avoid being a directionless trader and making sure that you don’t make less profit than you can.
