Most people think that there is some specific trading system or strategy to use to become a successful trader. However, this could not be further from the truth.
In reality, it depends on the foundations that a trader is built. The Mindset and Psychology of the trader are what puts you on the top 5% in trading. It all boils down to YOU. How you perceive the market, how you feel about the market, and how you react to the market is what separate successful from unsuccessful traders. Otherwise, wouldn’t 95% of trader fail at making consistent profits, right?
So, what does it take to become successful at trading? Here are my five most important factors that will determine your success:
This is a long-term game. You should think in probabilities and do not be emotionally attached to your losses – or wins. Always stick to your strategy, and let your trades play out. If you are profitable in the end, then you win. If you are losing, then you might need to review your mistakes and improve on your trading strategy.
Always plan your trades and your day around your trading schedule. Planning your trades will help you make sure that take only the trades that meet your strategy criteria. Also, always develop a backup scenario for your trading strategy. Remember! There is always more than one possible outcome for any trade taken. Therefore, it is always better to be prepared for different scenarios.
3. Risk Management
I know you have read this a lot everywhere, but I can emphasise enough how important risk management is to trading. Always use your calculator and do not risk more than 2% of your capital. Also, do not let your winners run because you never know where the price will stop and reverse. Instead, take some of the profit out of the trade while running the trades and trail your stop loss.
4. Master Your Trading Strategy
To develop the confidence needed in trading and trade without hesitation, you need to know your strategy inside out, and know, in advance, what your losses and profits will look like in the long run.
5. Learn About Yourself
If you do not understand yourself, you will never be a successful trader. You need to reflect on every mistake you have made and learn why you made that mistake. I am not talking about your strategy flaws. I am talking about your psychological flaws. We all have them, but we are never aware of them until we start trading because trading exposes our weaknesses. Therefore, instead of ignoring them, you have to acknowledge these flaws, such as always wanting to be right. You need to find a way in your trading strategy that makes you comfortable psychologically to trade without hesitation of fears. Only then, you will be able to develop the discipline required to become a successful trader.
A great book that will help you begin to think about the Forex markets in the correct manner is Trading In The Zone, by Mark Douglas. I highly recommend buying this book and applying all the principles it contains.