Most of the people who have tried their hands at forex trading often sum it up in one word- tragedy. I am not being pessimistic here and trying to scare everyone out of forex trading. In fact, this post is going to discuss how to be a successful forex trader and the fastest way to be successful at something is to first look at the pitfalls and learn to avoid them. So let’s try to recognize the routine mistakes done by unsuccessful forex traders:
Wasting Time Money and Effort
The commonest introduction of newbies into the world of forex trading is via online forums, friends who themselves are newbie forex traders, forex websites / blogs etc where they frequently chance upon some tips or tricks and then start applying them. It is only after some time that they get the idea to research online via books, eBooks, DVD, courses etc to learn better techniques and winning trade strategies. All this involves a lot of money, time and effortsand the end result is not as effective as one would like it to be.
Lack of Patience
Forex trading requires a lot of mental discipline and of course patience to get through, but newbies lack in both areas. Changing from one trading strategy to another in quick succession without any consistency finally leads to unprecedented losses, wrong impressions about forex trading and severe depression or frustration in general.
The strategy that was applied could have been a winning one but probably there were other factors that affected the outcome.
Inability to Utilize News Feeds Properly
Every forex trader knows how important it is to keep track of the news feed. But it is not simply enough to know that a certain news event is going to occur. A successful forex trader should also know the direction of the market swing that will occur as a result of the news event.
Even if you know what the outcome of a certain news is going to be, it still is not enough for successful forex trading. You must also know when to enter the market with your opening trade after the news event. Markets can be very volatile immediately before and after the event and opening your trade at these dangerously precarious situations can jeopardize your wins even if you have the best of preparations.
This again calls for a high level of mental discipline, patience and proper foresight to anticipate the market environment.
Enlightenment Comes Only to a Select Few
In the midst of all these losses, frustrations and setbacks, there are only very few folks who finally realize that forex trading infact call for more than just a set of forex trading strategies/ techniques. As the famous adage says, ‘Better late than never’; these folks now understand that in addition to the trading techniques, the right forex trading psychology is an extremely critical aspect in assuring winning trades and becoming consistently successful at forex trading.
The right mental approach towards forex trading can beat even the best of all the strategies applied by a forex trader with wrong mentality.
There is solid research to backup this claim. In the US forex traders were subjected to a study and the results revealed that the right psychology or mental attitude towards forex trading accounted for about 80% of the successes applied by a forex trader using a certain winning strategy.
That explains a lot about successful forex traders. Right psychology for forex trading also includes effective money management skills in addition to having the correct mental attitude towards forex trading.
Finally on the Right Path
When the trading system is formulated and trading skills are finally perfected, people start trading competently. Most traders encounter a setback at some step; either the market environment changes or they do not follow their own rules. However, if effective money management is followed, this should not be a serious problem.
Jeopardizing Your Own Success
Often it is observed that even after winning for a number of months, if a small set back is encountered, many great traders stop trading to evaluate what has gone wrong. They consider that some mistake has been committed on their part and stop trading in order to assess their strategies and techniques.
This is often a blunder, and certainly due to the emotional component which plays in the back of our minds every day that we engage in forex trading.
It is a grave mistake to get in our own way and become a deterrent to the consistent day to day trading routine. Even in the incidence of losses, the forex trader has to be motivated enough to press ahead and retain trust in their own performance and abilities.