9 steps of a successful trader
Large volumes of information, charts, coefficients – all this makes trading in Forex a real art, not subject to scientific justification. Talent is necessary for trading in the Forex market, but you can’t go far on it alone. The best traders hone their skills in practice and adhere to strict discipline. They often analyze their own actions to understand what drives their trade and to exclude fear and greed from it. In this article 9 simple steps are given which will help beginners to increase their professionalism. Professional traders can also find useful information for themselves.
Step 1. Define your goals and develop your own trading style
Before you travel, you need to understand where and how you want to get there. It is important to have a clear understanding of your goals and how to achieve them. You should be sure that your trading system will help you implement all your plans. Each trading system has its own level of risk and requires an individual approach from the trader. For example, if you are not able to sleep well with an open position, you should start intraday trading. On the other hand, if you have sufficient funds to make a profit in the long run, you are more suitable for position trading. No matter what trading strategy you choose, the most important thing is that it fits your character. The mismatch between the trading system and the trader’s character will lead to stresses and losses.
Step 2. Choose the broker providing the most suitable trading conditions, but pay attention to the trading platform – it should correspond to your trading system
. It is very important to choose a broker providing a trading platform suitable for your analysis. For example, if you prefer to use Fibonacci numbers as trading signals, make sure that the trading platform allows you to build Fibonacci lines.
You need to choose a broker with an excellent reputation, so spare no time and compare brokers whose trading conditions suit you.
Always remember that a good broker with a bad platform, as well as a bad broker with a good platform, can be a source of serious problems
Step 3. Follow the selected trading system.
Before you directly enter the market, you need to decide what will affect your decision to enter or exit the market. Some traders prefer to analyze fundamental data on the company or the economy as a whole to make trading decisions; other traders use technical analysis – they need nothing but charts. Remember that fundamental data affects long-term trends, and graph analysis can help identify short-term trading opportunities. No matter which trading system you choose, it is important that you follow it closely. Also, an important characteristic of the trading system is its ability to adapt to constantly changing market conditions
Step 4. Use long timeframes to determine the overall trend, and shorter timeframes to determine entry and exit points
Many traders are confused because of the conflicting information received when viewing charts on different timeframes. The buy signal on the weekly chart can be overlaid with a sell signal on the intraday chart. Thus, if you define the main direction with a weekly chart and the entry point with a daily chart, make sure that the charts do not contradict each other. In other words, if a buy signal is generated on the weekly chart, you should wait for its confirmation on the daily chart
Step 5. Calculate the average profit value.
The average profit value helps to estimate the stability of the system. You need to remember all trading operations and calculate the difference between all profitable and losing trades.
Take a look at the last 10 trading operations. If you don’t have a real trading history, test your system on historical data and identify entry and exit points. Determine the total profit/loss on all trading operations and record the results
After that, sum up the results of all winning trades and divide the received amount by the number of these trades:
E= [1+ (W/L)] xP – 1
W – average winning deal
L – average losing trade
P-percentage of winning trades
If you have carried out 10 trading operations, and 6 of them turned out to be profitable, and 4 – unprofitable, the percentage of winning trades is 60%. Let’s assume that the profit on the winning trades was $2,400, then the average profit on the trade is equal to $2,400/6 = $400. If the amount of losses is 1200$, the average loss on the trade is equal to 1,200/4 = 300$. Let’s put the results into the formula: E= [1+ (400/300)] x 0.6 – 1 = 0.40 or 40%. An average profit value of 40% means that you will get 40 cents of profit from every dollar you invest.
Step 6. Focus on trading and learn to accept small losses with pleasure
Once you have deposited money into your account, you must remember that it is in the risk zone. That’s why you shouldn’t need this money to pay your daily expenses, bills, etc. Consider that the money on your trading account is your available funds that can be spent. This will psychologically prepare you for taking small losses, which is the basis of any risk management system. Focusing on trading and taking small losses, instead of counting every cent on the account, will greatly increase your chances of success. Secondly, the maximum risk on one trade should not exceed 2% of the total capital amount. It means that if the sum of your capital makes 10000$, the loss on any transaction should not exceed 200$ (2% from 10000$). If your stops are located in such a way that losses will significantly exceed 2%, it is necessary to reduce the duration of the transaction or reduce the percentage of use of borrowed funds
Step 7. Form a chain of positive results.
If you trade successfully according to your plan, a chain of positive results is formed. Success leads to even greater success, which in turn strengthens the trader’s confidence, especially if the trade is profitable. Even if you are suffering small losses, but this is happening according to your plan, you gain self-confidence that will eventually lead to success
Step eight. Do a weekly analysis.
Getting ready in advance is a great habit. Study weekend charts, look for trading models and make a list of news that may affect the value of a trading instrument. You may come across some graphical model, such as a double top, and hear the opinion of experts on the upcoming reversal in the market. It is necessary to be cautious about such situations, because experts are trying to involve you in every way to take advantage of the increased liquidity in their interests. At the weekend you can objectively analyze the situation and develop the most effective trading strategy for the coming week. Learn to be patient, wait for your forecasts to come true, and the market will reward you for it.
If the market does not reach your predicted entry point, do not take any action. You may have to wait much longer for a good trading opportunity than you planned. If you missed a trading opportunity, wait for the next one. Patience and discipline will help you become a good trader
Step 9. Take notes
. Records are one of the most effective tools for self-study of a trader. Print out the chart and list all the necessary conditions for a trade, including fundamental data that may affect your decisions. Point out the entry and exit points on the graph. Write down all necessary comments. Be sure to keep all the materials so that you can always read them later. Write down all emotional reasons that affect any action. Did you panic? Have you been overcome by greed or anxiety? Record all your experiences on paper, as it will help you to learn how to make objective decisions, control feelings and follow your trading system, not habits
The steps described above will help you to find your approach to trading and increase your level of professionalism. Trade is an art that requires special discipline and consistency in decision-making. Strictly follow your own Forex trading rules and success will not take long.