For aspiring traders looking to make quick windfalls, the Foreign Exchange Market (forex) can seem like an irresistible money-making machine. But without practice, dedication and, above all else, discipline, forex trading can quickly prove to be a very costly mistake. Just like the tightrope, no new forex traders should step on to the stage unprepared, lest unreasonable expectations or simple greed should cause you to lose your balance.
As the adage goes, whoever fails to prepare only succeeds in preparing to fail. For invaluable advice on how to act like a successful trader, be sure to check out the infographic below.
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It’s for this reason that the initial success rate for new forex traders is disproportionately low, and most will give up after posting a series of losses from their early trading activity. The first rule of forex trading is to make peace with the fact that not all trades will be successful. A 2014 study featured in the Wall Street Journal showed that—based on 110,000 trades—the individual forex trader loses an average of 3% a week. Trading is an ultimately defensive game; never risk losing more than you can afford to on a trade. Like Gordon Gekko said in 1987’s Wall Street, the key to the game of forex trading is capital reserves, and if you don’t have enough, you can’t play with the big boys. Losses happen, so get over it.
Without the right training and temperament, it’s easy to get locked into an endgame with the market as you watch those reserves slip between your fingers. So how to turn forex trading from a zero-sum into a livelihood? In the latest infographic from forex specialists HiWayFX, they look for the mercurial element that separates successful traders from unsuccessful ones. Taking inspiration from Stephen R. Covey’s seminal 1989 book, The 7 Habits of Highly Effective People, they show how forming habits when learning how to trade forex can protect you from rash decisions, unnecessary losses and rookie errors when trading on the market.
Drawing on advice from some of the world’s leading forex professionals and traders, the infographic offers invaluable insights on how to strike gold on the market. What’s surprising is not so much what they do, but what they don’t do. For instance, even if their trading session is not going to plan, many traders don’t make in-play changes to their strategy. Rather than making rash decisions, they diligently follow the rules and evaluate why things went wrong afterwards. Nor do they make the mistake of trading all the time; instead, they only trade when the system will deliver results for their systems. “You must exercise the discipline to follow the process”, says Jamie Saettele, trading analyst for SB Trade Desk and author of Sentiment in the Forex Market, and that means doing the diligence, showing restraint and putting in the work.
As the adage goes, whoever fails to prepare only succeeds in preparing to fail.