Forex trading is a mystical career path. No one knows for certain how many traders there are, how many profitable traders exist, and if you can actually make a living out of it yourself. It’s not like pursuing law or medicine wherein you have a straightforward educational trajectory and you know what to expect in the following years to come.
However, certainly enough, there are key factors that affect Forex trading success. And if you are truly serious about pursuing a career as a Forex trader, you’ll need to acknowledge the impact of these said factors.
Many trading analysts and professional traders will tell you that technicals play a very minute role in consistent, profitable trading. A larger percentage, though numerically different from one source to the next, is attributed to sound trading mindset. The ability to control natural human emotions including fear, greed, and anger is a skill all aspiring traders should learn and master if they wish to go pro some day.
Psychology drives the trader to enter a position, exit it, add to it, and any other move possible. Traders with little to no discipline will find themselves incurring huge losses due to the inability to close trades that are going south. In their mind, they want to wait for price to reverse and then hopefully they can avoid taking the loss and even make some profit in the process.
Another example of psychology at work from a trading perspective is during a winning trade. The logical thing to do is set a TP or target profit and then wait for the trade to hit that price point. When winning, novice traders start to become greedy, moving their TP on the trade to seemingly absurd levels. In the end, the trade reverses and most of the potential profit gets lost or the trade may even turn into a loser.
Time and Money
If a trader has neither of the two, there remains a proclivity to over-trade in order to compensate for lack of larger lot sizes and time available. Fortunately, these two key factors that affect Forex trading success are manageable and can be improved. For instance, try to find part-time employment while swing trading Forex daily charts. This way, you are able to grow your account and, ultimately, the lot sizes you can open.
Working with the right broker is crucial to protecting your hard-earned money and executing trades at the best possible price. Look for an experienced and well-established broker who has the financial strength to withstand tough economic times. If a broker goes belly up, you risk losing all your capital in the process.
Of course, the strategy you use to enter trades have a direct effect towards your bottomline. Hence, it is crucial to learn and master a strategy or strategies that work best with your personality and trade objectives. Once you’ve got a potential winning strategy that generates consistent profits, use a demo account to back- and forward-test it.