Anyone interested in the forex trading market is surely aware that it can be a daunting place of business. Books, movies and magazines are filled with tales of the many aspiring traders that are driven back in fear of the risks associated with stock markets.
Truly great traders hear these tales and feel inspiration. They hear news like this and feel challenged to find a path to prosperity where others have failed. In the long run it is this confidence in the face of risk that produces the most successful traders.
But all the courage in the world doesn’t change the risks. You can watch every step you take and play the game as smart as you can and still watch in horror as you best laid plans end in failure. The reasons for this can be simply superficial, while the underlying causes of others can be much more profound.
The Importance of Appreciating the Forex Market
The most common beginner flaws are spawned from misconceptions about the forex trading market. For example, assuming that the market functions as an independent entity. This causes the individual to adopt a “me against the market strategy”; the truths are far more profound than this.
The forex market is more like a pivotal point where the fluctuations of a very volatile world come to play in a unique way. The market operates as the result of innumerable actions; the actions of individual traders, like you, have far-reaching implications.
Looking at the market is like evaluating the final production of the social moods and finance culture of the modern world. Many others traders exactly like you will be evaluating these results and making their investment decisions from what they understand. Many traders making the same decision create larger patterns and the market is changed yet again.
Another important imperative to your decisions should be the fact that there is an intrinsic balance to the market, for gains to be made on one side, there will have to be losses suffered in another. If there are no gains and ergo no losses, then there is also no market changes and no trading.
Evaluating the Odds
This information can sound very discouraging in the beginning, what is the point of setting out if there is a 90% failure rate. Simply put, it is attitude and optimism that are essential to trading success. Sure the odds can be stacked against you at times, but this only makes coming out on top all the sweeter— if you have the courage to persist.
The best solution for getting a healthy chunk of trading profits is to maintain a fine balance between hope and realism. Recognizing personal experience and the learning curve you will be facing allows you to set realistic goals and plans. This is the wisdom that has brought many traders to unimagined dividends.
There is an important psychology to trading and these are impacted by the culture and sociology of the world’s financial communities. The rising and falling prices of the market can be directly linked to social upheaval, wars and conflicts, trends in global thinking and trader mentality; as your trading prowess increases you will be able to discern these ‘signs of the times’ to make unprecedented profits.
Essential Pointers for Forex Trading Success
Now that the psychological aspects have been addressed, we can more fully understand how some of the more superficial shortcomings can be best avoided. In Forex trading, there is an essential list of things you shouldn’t do. Understanding these mistakes will help you formulate your list of best practices.
Remember that the trading game is not one of being a clairvoyant or playing a perfect game, rather it is about accepting the learning experience with all its disappointment and still maintaining the patience and attention to grasp opportunity when you see it.
Consider these reasons many traders fail and you may be able to dodge some potential landmines littering your path.
Mistake No.1: Forgetting the importance of practice
There is some impressive trading simulator software that can illustrate important forex trading concepts that would be superfluous to mention in this article. These simulators can introduce the individual to what it is like to play the game, how obscure factors affect prices and more.
What they fail to impart is how crucial the psychology of the game can be. When you play with a fake account, it can be mildly disappointing, but nothing like losing big in the real markets.
Mistake No. 2: Too much time and focus on strategy
Ask any of the really great traders, they can tell you there is no absolute winning plan. Wins and losses represent two different sides of the game. The best strategies take years to craft and are rarely applicable outside of their own purpose. It is the skills and experience of the trader behind the most effective planning and these qualities take time to evolve.
Mistake No. 3: Deviation from original plans
Original plans have an important role in your trading and must be followed through. When a plan fails, as they often do, they can be adjusted and retried for better results, this is what the game is all about. But deviating from the plan and running off on a hunch, is taking a huge risk. Furthermore, even if you do find a success you will not have the methodologies to follow it up with another success.
Mistake No. 4: Reacting to a whim
A savvy trader is fully aware of the risk-to-reward ratio and keeps this in mind at every action. Without adherence to a trading plan, the actions you make can be shot in the dark— while you may actually hit something it will only be luck. The statistics show that this strategy is a bad idea more often than not.
Mistake No.5: Trading too much
The idea that you will increase your chances of success the more often you trade is a misconception. Trading works the best when done from an established plan and a clear objective. Trade only when you find a good opportunity and you will be rewarded, fill daily quotas and you will be bleeding cash.
In Closing — failure is huge part of forex trading and a huge part of life. In the stock market as in life, it is the way failure is handled, squeezed and distilled into tomorrow’s success that makes us who we are. The opportunities to achieve success are greatly increased with the commitment you have to finding your best trading habits.
At Live traders we have formed a community dedicated to providing the novice trader with the skills and mindsets needed for success. If you feel you have the strength of heart and the nerves of steel required to make it in the trading game, visit Live Traders today and take advantage of expert advice and perspectives.