Forex trading is all about mind set. Setting your mind from stocks and in to Forex. A little bit of diversification helps, isn’t it? You may want to read my post – Can you Profit From Forex Trading? and Forex Trading or Stock Trading, where to expect higher return. In this post we will look in to the mind factor while trading Forex.
There are several paths towards successful trading in the financial markets, each one with its own blend of techniques, methodologies, and skills, and it is only natural that many people not involved with trading view it as an unreachable activity. The markets and the trader can be compared to the open ocean and a sailor.
For a sailor to master the open ocean effectively, he must have patience to learn, the necessary skills, and be aware of his surroundings. Similarly, a successful trader needs to combine market analysis, skills, and discipline and the right mindset for increasing the odds for success, and also a strategy as his compass for taking the right directions.
Many variables of your style are related to your character – for example the time frame you choose to view on your trading charts. Charts provide historical and current price data and the time frame for a forex chart is the period at which price information is viewed – minute-by-minute, hourly, daily, monthly etc.
Working with fifteen-minute charts is probably an indication that the trader prefers positions without the uncertainty of overnight price volatility, whereas the preference of weekly charts implies a tolerance to that volatility while he sleeps.
Your choice of time frame will highly depend on your willingness to constantly be looking at a screen or to make slower steps a couple of hours each day.
The choice of a strategy is of paramount importance as it will play a major role in your success. Usually, a reliable strategy will be the one which is profitable more than half of the time. If that is the case, it’s obvious to assume that profits will come at a higher frequency than losses and therefore it will be a winning formula.
After you try out a few strategies and find the one that suits you, stick with it unless later in the future you see consistent losses.
Markets are by no means uniform or behave in the same way. Some are trading with higher volumes than others and some are more volatile. A trader’s system will most probably not be suitable for all currency pairs or commodities, and so a process of trial and error might be needed.
Be methodical with your trials to see what works, you might also want to test on different time frames because it could make the difference.
A good strategy without a trader’s proper mindset is probably not going to work. For example, following the rules and directions requires discipline and patience. The strategy’s requirements for trading have to be met, and those might include pre-specified entry and exit points, and maybe stop loss and take profit levels.
If there is no clear signal for a position under examination, just stay away from any action and wait for the next opportunity as there will definitely be one.
The trading strategies and combinations are countless. Each one has its own parameters and is suitable for specific types of personalities. They only have one thing in common: the aim to make money out of trading positions. Make sure that your mentality and mindset reflect the strategy you choose.
And just like sailing captains, don’t forget that patience and discipline are characteristics that successful traders carry with them for long-term careers in the forex markets.