Hello!
Anyone can trade; however, a lesser amount of trades result in profit. There’s a huge profit to be made in the forex market, but only traders equipped with the right trading skills and strategies will be able to tap into the massive potential of the forex market.
Therefore, before you go live by hitting the buy or sell button, you need to equip yourself with four essential trading skills to help you avoid the pitfalls of the forex market.
1. Develop strong mathematical and analytical skills
Becoming a successful Forex trader requires that you hone in on your analytical skills. Forex trading generates a lot of data which requires strong analytical skills to analyze correctly.
You will need basic maths skills to calculate the number of pips you’re targeting, the amount of profit you intend to make, etc.
Also, using technical indicators such as the Fibonacci tool, Relative Strength Index (RSI), Money Flow Index, Stochastics, Moving Averages, Bollinger Bands, etc., and drawing up your entry and exit strategies requires that you will be able to interpret and analyze market data correctly.
Besides learning how to use technical indicators correctly, you will also need to learn to interpret data and statistics from the fundamental analysis since most of the data present in the fundamental analysis are economic growth statistics released by governments and central banks.
For example, the Eurozone economic indicators show that the Eurozone GDP is up by 2.2%, and employment records a 0.7% rise. This data can translate to holding a buy position on Euro pairs believing that the data presented is a positive growth indicator for the Euro currency.
In summary, a successful Forex trader is one who can use basic maths skills to analyze and interpret data correctly.
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2. Be disciplined with strong mental stamina
According to Norman Welz, Author of Tradingpsychologie (Psychology of Trading), effective trading involves modifying your personality.
Even the best Forex traders get burnt once in a while, and this can be a regular occurrence for you at the beginning of your Forex journey (the beginning is always challenging for every endeavor).
Experiencing losses can dampen your interest in Forex trading; at this point, you will need to exercise strong mental discipline if your end goal is to make money from Forex.
Therefore, to be a successful forex trader, you have to develop strong self-discipline by staying focused on your goal, sticking to winning trading strategies, and staying positive irrespective of your trading outcome.
3. Be a good record keeper
Professional traders are good to record keepers. ‘Keeping Records removes our bias towards blaming poor results on bad luck’ – Dean Hyde, Managing Director at Blueberry Markets. Keeping records of your trades is one of the most vital aspects of your trading activities, and it requires discipline to do so.
It is the only way you can discover the best strategy that works for you. How else can you improve your strategy if you have no record of previous trades?
Developing a working strategy means you must keep adjusting your past trades; only then can you discover what works for you.
According to Investopedia, over time, your trading journal provides you with the much-needed historical perspective that serves as a source of relevant data like a summary of your trade and the state of your trading account.
This is evidenced in the words of Jack Schwager in ‘Discussing insights from Mark Cook:’ By compiling detailed daily diaries of his market observations for over a decade, Cook was able to develop a slew of original, high-reliability trading strategies.
As a beginner trader looking to be successful in trading, your record-keeping should include:
- point of entry
- stop-loss
- take profit
- Dollar risk
- money management, etc.
In summary, Successful trading strategies are developed from meticulous record keeping.
4. Have a good understanding of what the forex market is
Before starting out as a Forex trader, you need to understand what the Forex market is; You should familiarize yourself with Forex trading terms, technical indicators, market dynamics, etc.
Becoming a successful Forex trader involves learning how to utilize available technical and fundamental data, conducting research, and devoting yourself to hours of formal and informal learning. If you can understand how the Forex market operates, you’re ready to start trading.
Learning does not end at learning all there is to know about the Forex market; you still have to invest quality time in learning to trade using demo accounts, deploying the skills and strategies you have learned about Forex trading.
A consistent win will show that you’re ready to start live trading. In summary, you can only be a successful trader only when you have learned about the Forex market and can apply the knowledge and skills you have learned in successful trading.
Thank you!
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