Every trader begins their own arduous trading career by taking baby steps in learning and improving their knowledge and skill in a continuous manner. They need to focus all of their energy and effort to improve the probability or winning in every trade made while simultaneously learning to deal with emotions. Everyone of us are unique individuals. We look at the same situation but we react and also analysis it differently. While the basic knowledge for trading, both fundamental and technical analysis are similar for most financial instruments, an example can be the analysis of the potential of a certain company stock to make money.
However, The methods of trading, the trading plans, level of discipline and emotional aspects for each individual are very different. This is way, it can be difficult to make money in the market and have a trading career if the individual trader does not improve on his areas of weaknesses.
So, what are the attributes for a successful Forex trader? There are eight attributes that are crucial to the success of a trader. But one thing to note that even though you may have all of these attributes, the probability to lose money is always present as the market is a place where human emotions congregate. The eight attributes are:
1) Properly capitalized with money that you can afford to lose: Actually, trading is a difficult career. If you are not properly capitalized with money you can afford to lose, chances of losing money is always present and high as we will definitely make mistakes during the learning curve. One of the common mistakes tends to be over trading in a single trade. When the market moves according to the trader’s prediction, then he will be surely happy. But again, what happens when the market moves against that person’s position?
2) Understands the financial instruments being traded: There are many different types of financial instruments available for trading in the market. Understanding the instruments you trade is essential. What good are you are doing yourself when you don’t know how the financial instruments you are trading works? This is especially more important for derivatives since the presence of many factors in the pricing of the instruments can result in losses even though the market moved in the in the direction you predicted.
3) Has a trading plan: Having a professional trading plan is very important issue. A good trading plan is like your trading strategy for entering and exiting from a trade. Actually, it is like your navigator in darkness. While in trading, it is your entry and exist system for making and taking profits and also your management of capital available for trading. Without one, you are like a blind person moving around an area full of traps and pitfalls everywhere.
4) Able to practice self-discipline: The ability of a trader to continue learning, stick and adhere to the plan while not allowing emotions to take over is an essential internal attribute. One example of the importance of continuing to learn can be the case of some people who allow arrogance to get the better of them which will become their downfall eventually since they think that learning has become unimportant. If there is no thing to remember, methods and information will keep changing with time, falling behind is imminent when one stops learning.
5) Able to remain focus: We occasionally hear some traders complain that while they are away to the washroom for just five minutes, a huge loss has occurred in that short time. We even hear people complaining that they got distracted while chatting online that they entered a trade wrongly resulting losses. These are just typical scenarios that had happened on the misfortunes of these poor traders.
6) Able to control and use emotions to your advantage: This may sound contradicting. The ability to control your emotions is essential and remains very important as allowing emotions to take over will mean losing control of the trade. However, we do hear people with intuition, women’s sixth sense or gut feeling. These people can use that to help them to increase the probability in their trades provided they base it on their plan, trading system etc.
7) Has a low tolerance for risk: Successful traders hate risk. The trading business is already a risky business due to many internal and external factors. Having a low risk appetite, lowers the risk probability of losing money. You should practice minimizing your risk and learn to preserve capital as your top priority when trading.
8) Has a risk management plan: Just like your trading plan, this part forms the risk management of all your trades. They are your criteria to exit the trade immediately when it doesn’t favor your prediction or forecasts of the market and is resulting in losses. These criteria will assist in cutting losses and preserving capital.