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5 Ideas That Power Top Forex Traders
05/11/2015 9:00 am EST
The best currency traders stand out not because of their strategies, but because of their mental approach, writes Nial Fuller of Learn To Trade The Market, explaining five components of a winning forex mentality.
Successful forex traders think significantly differently than beginning and struggling traders. Many struggling traders seem to think that professional or successful traders have some "Holy Grail" trading system that they are keeping from the rest of the world and that it's the reason why they make consistent money. In reality, this just isn't true.
You could give a trader with a successful trading mindset the exact same trading system or strategy as a struggling or beginning trader, and you would find the successful trader would make money whilst the struggling trader would lose. The implication here is that the primary difference between winning and losing traders is the way that they think; not the strategy or system that they trade with.
So, how can you start thinking more like a successful trader?
Stop Overcomplicating Your Trading
One of the biggest differences between struggling and successful forex traders is that struggling traders tend to make trading a lot more complicated than it really needs to be. They do this by trying to find some "perfect" trading system that allows them to totally automate the trading process, using tons of messy indicators on their charts, analyzing the markets too much, and looking at too much fundamental data and news, amongst other things.
If you have the chance to trade alongside any professional forex trader, you may be surprised at just how technically simple their trading strategy is. Most successful traders are not trying to analyze ten different indicators or wasting their time loading automated trading robots onto their charts. They have a trading edge that is simple, yet effective, and they trade only when their edge is present.
Learn to Trade the Daily Charts First
It's very tempting to get stuck in a cycle of trying to trade off the five-minute or 15-minute time frames, but I can guarantee you that these time frames contain a lot more market noise and random price movement than the higher time frames.
I almost exclusively trade off the daily charts, with the four-hour and weekly charts being my other two primary time frames. Through my communication with beginning and struggling traders, I know for a fact that almost all of them get tempted into trying to scalp or daytrade the markets on the lower-time-frame charts.
Trading off the daily charts allows you to see a clearer picture of the markets because there simply is not as much "random" and non-meaningful price movement to sift through. Don't fall into the trap of thinking that you will get more opportunities by trading the lower time frames, because whilst you may get more, they are not going to be as high-probability as the higher-time-frame opportunities.
When it comes to your hard-earned money, you really don't want to sacrifice quality trades for a higher quantity of trades. In the end, it's just going to amount to more losses because you are far more likely to be emotional when trying to sift through the random market noise in the lower-time-frame charts.
Trade with Logic and Objectivity, Not Emotion
If you want to think like a successful forex trader, you are going to have to stop trading based on emotional impulses. A successful forex trader's mind is a calm and organized routine of thoughts that do not give in to the temptations that are always lurking in the markets. When you are confident in your trading strategy, and have a trading plan built around it that you actually stick to, you will develop the proper trading mindset as a result.
Successful traders do not get emotional over a loss or a win, because they know it's just another execution of their trading edge, and the outcome of the next trade is not related to the outcome of the previous one. Struggling traders seem to base their next trading decision off the outcome of their previous trade, even if they are not consciously aware they are doing so. In order to remain objective and logical in the market, you really have to follow a plan and always make sure you are simply executing your edge, uninfluenced by your last trade.
Have a Routine
Perhaps the surest way to develop your mindset into that of a successful trader is to start developing positive trading habits. By positive trading habits I mean having a trading plan, a trading journal, and a consistent daily routine that you actually follow when trading the markets.
If you consistently perform the actions of a successful trader, like regularly updating your trading journal and actually using your trading plan, you will eventually cement them into a trading routine that will work to forge the mindset you need to trade successfully. The principle at work here is basically a principle that Napoleon Hill and other motivational speakers talk about, which is if you think like the type of person you want to be like, eventually you will become that person, even if you aren't now.
Our thoughts dictate what we get in life, so if you can turn your trading routine into a consistently positive and productive experience, you will naturally think a lot more positively and productively, and eventually this positivity and consistency will manifest itself in your trading results.
Be 100% Confident in Your Trading Edge
Finally, when you have 100% confidence in exactly what your trading edge is and when and how to trade it, you will be very unlikely to commit most of the emotional trading mistakes that many beginners and struggling traders make.
My philosophy in the markets has always been to just sit and wait patiently like a sniper, and then, when a price action set-up forms that meets the criteria in my trading plan, I simply execute the trade, just like a sniper only takes the shot once their target comes into view. Many traders waffle back and forth between trading strategies and systems. Thus, if you are not 100% confident in what your trading edge is and how to trade it, you need to fix this problem as soon as possible because it is paramount to helping you think like a successful trader.
By Nial Fuller, CEO and founder, Learn To Trade The Market
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