Forex trading is one of the most rewarding, yet challenging careers anyone can embark upon. There are few other carers where your wealth will continue to grow exponentially while you continue to do essentially the same thing. You can also work from home, or indeed the poolside or anywhere you care to choose, and have full control over your time, time you can spend with your family.
However, the path to profit trading is, as they say full of potholes. Whilst trading is simple, it is not easy, and it is easy for a newbie to be led down the wrong path, and end up losing money hand over foot.
The 4 Essential Success Factors
There are four basic pillows of trading, essential factors you must possess if you are to have a chance at succeeding as a forex trader.
Skills and Strategy – This is what you must acquire first, the skills to trade, and a strategy that you know has a positive expectation, ie one that will make money in the long run. There are various ways you can acquire this, read as many books on trading as you can, find a mentor to teach you a strategy that works or pay for someone to show you a trading strategy that makes money and master it.
Discipline – Once you have a strategy you must have the discipline to stick to it. If that strategy which has been backtested, makes money in the long run it is in your best interest to stick to it. By keeping to the strategy, you perform the actions that will make you money over time. Losses invariably start to occur when you fiddle or change the strategy. If it is not broken, do not fix it.
Lack of discipline has been the undoing of many advancing traders. Many of the Market Wizards Jack Schwager interviewed cited discipline as the single largest factor in their success, and this is essential for you discipline yourself to follow your strategy.
Risk Management – Never bet the ranch. Risk at most 1% of your capital on each trade, and never stare so much that if the trade went against you, you would struggle to make the capital back. Staying in the game and not losing all your money is the first factor in trading success. If you do not lose too much, you are extremely unlikely to lose all your money. When you're starting out, staying in the game is the single most critical factor in your success, so manage your risk, set limits on how much you can lose by deciding what this threshold is and setting your stoplosses in the market at he appropriate place.
Patience – Once you have all of the above, you need to be patient, and give yourself time to mature as a trader. Knowledge must be given the chance to develop into understanding, and it will be at this point that you will start to make consistent profits by sticking to your strategy. Good risk management will ensure that you do not lose all your money before the passage of time gives you a chance to shine and make more money than you could possibly imagine.
Putting the 4 Factors in Place
You could, over time figure out these all for yourself, but it is much quicker and less painful to find a mentor. Having someone to guide you through the process of learning is crucial for your survival and ultimate success. Whilst it is possible to do this all by yourself, you will lose significantly less money with a mentor, so it pays to invest in teaching materials and networking to find profitable traders who are willing to teach you.
Putting the 4 factors in place are no guarantee of success, they will give you your best chance of success and provide a good start on your path to profitability