20 essential skills of a good forex trader

Your strategy and attitude towards a specific trade define the size of potential gain. The forex market has a huge potential to generate profit for you. Prepare yourself for it. Here we have listed some most important qualities or skills which a good forex trader should have.

1) Choose between trading and investing: You can either be a forex trader or forex investor. Moving with both can lead to severe trouble. There is a tiny difference between investing and trading.

Investing refers to gradually creating wealth over the long term by purchasing and holding a portfolio of mutual funds, stocks, bonds, a set of stocks and several other investment instruments.

Trading, in contrast, deals with more frequent transactions which include selling and buying of currency pairs stocks, commodities, or other assets. The ultimate goal is to make huge returns that outperform hold-and-buy investing.

2) Maintaining an accounting system and trading journal: Keep track of your open position daily and try to restrict them to 2 or 3 short trades and 2 or 3 long trades. Review your overall performance and trades every month and find the points on which you can improve. Keeping proper records is essential for your growth as a forex trader.

3) Trade the asset which you understand better: Never go on trading those stocks which you do not understand at all. The media or various websites might promote certain stocks but choose the one with which you feel confident.

4) Always choose the realistic exit and entry points and jot them down: It goes hand in hand with preparing yourself and doing homework before each trade. Most forex traders think that determining the entry points in a trade is a hard nut to crack. However, the reality is the opposite. The exit points are more vital and hard to manage.

5) Hunt for skills rather than money: If your entire focus lies on money creation then you can never learn skills. With this attitude, you can get short-term profit, but this is not the correct way to play long-term in the financial market. Remember, success never comes by adopting shortcuts. It requires deep knowledge and dedication.

6) Remember losses are part and parcel of the financial arena: Losses are part of the financial journey, even the successful forex trader loses money at some point or the other. There is nothing such as a 100% win. If someone tries to lure you or befool you by guaranteeing 100 per cent win or profit, move away from that person or firm immediately.

7) Mitigate losses to attain success: Once trapped in massive losses; it is hard to recover from them. Seven to eight per cent loss is still an acceptable figure, but if it surges to fifty per cent, it causes unwanted stress. Hence do not let your losses overburden you. Try to cut them and move on. Carrying them forward might mess with your psyche.

8) Try to learn risk management skills: Risk management is the most vital factor in trading. It is the primary aspect that separates a successful forex trader from a good trader. Never let your emotions overpower your trading positions and try not to be stubborn with your holdings.

9) The position and opinion are two different aspects: Just because you are bearish, does not reflect that you have to trade short sides. At the same time, just because you have a short position does not essentially reflect that you are bearish.

10) Remember, overconfidence and ego are your worst enemy: Most of the investors worst failures come right after a fabulous winning streak. Have you wondered why? It is just because of their ego and overconfidence. It does not matter how successful you are; the financial market teaches lessons on every turn. It kicks you out if you fail at any single point.

11) Focus on executing trades: Always keep in mind that each execution is a trade. Never leave your capital on the table and wait for things to happen on their own.
Make efforts, read all the factors which influence your trade, set bids at the correct time and close trade when things go against your predictions.

12) Never give up learning: Learning and searching for something new each day or if you are too busy with the regular stuff, you can try this out on weekends. The best source of learning is from the stories and financial experiences of successful and experienced traders. Apart from this, losing and winning trading positions are also the best lessons to learn from.

13) Get out as soon as you suspect any risk: If you are confused with a certain position, or you are not sure about a particular trend. Try to get out of the trade as soon as possible. Instead of getting trapped in unwanted situations, it is safe to close the trading position. Always keep in mind that cash itself is a position.

14) Make a trading plan before entering into the real financial world: This idea might seem to be boring, but you can not persist in the financial world without a robust trading plan. Most forex traders do give importance to such a plan, but they are those who eventually fall into the list of successful traders.

Your trading plan should include the perfect entry and exit points, trading strategy you will follow, the factor that might influence the trade and of course, the risk management strategy. It will help you out in the condition when you will find yourself trapped. All your plan and strategy will go in vain if you do not stick with them.

15) Paper trade: It refers to the trade which requests just one contract at the starting. Try not to jump straight and try to hit the ball out of the park. Learn and stay calm while you choose paper trading first and next holding trade position size small as soon as you enter live trading. One of the most serious things which can happen with you as an investor is, to begin with, the big winners.

16) Overtrading opens the door for losses: Trading just because you do not want to stop trading is entirely a disastrous idea. Commissions of trading add up. Stay vigilant toward the market price and trends and enter if you find favourable conditions and close position if you suspect any danger. This idea that trading continuously might mitigate the loss incurred at the initial stage is wrong.

17) Let your logic guide your decisions: Emotions and overthinking can destroy everything. Use various technical and fundamental indicators to make the trading decision. Follow the trading rules.

18) Be patient and disciplined: Patience and discipline are two primary skills that every forex trader needs. Staying in the financial market is vital because it enables you to learn from both the lows and highs and helps in making the essential adjustments to your trading. A successful forex trader possesses both these qualities, and they stick with them, especially at the time when the gain is non-existent.

19) Monitoring the market frequently may lead to poor performance: The forex market is a luring market. Regular monitoring is good but becoming obsessed with the market and forcing yourself to monitor price trends frequently can cause a problem. It can affect your decision-making skills to a larger extent. Take short breaks, walk around, and come back with the free head.

20) Investigating the broker before selecting
The broker is the fundamental entity of the financial market. It serves as a link between forex traders and forex markets. Any fault in this link can lead to heavy losses or can ever wipe out your account.

HFTrading is an authentic service provider regulated by the two financial bodies: the Australian Securities and Investments Commission and Financial Markets Authority. It is entirely a safe platform to invest in the forex market. The broker provides several exciting features such as Meta Trader 4, technical tools, research tools, leverages at an affordable price. The minimum deposit accepted by the broker is just $250.

The Bottom Line

The key message we wish to convey from this article is that each forex trader should develop the necessary skills for profitable and successful trading. The market reflects what you give. If you make these essential efforts, the market will surely reward you for your sincere efforts. Becoming a flourishing trader is not an easy job, but it is not impossible.

For enhancing your market knowledge, you can take various educational materials provided by HFTrading. It includes tutorials, articles, videos on demand and full-length courses.

Author's Bio: 

Hey! am alexander james. Am a blogger and I like to do reading and writing, especially in the arena of financial market trading. There are many myths about the market. I like breaking these myths and pushing people towards the practical world