About 95% of all Forex traders will lose money. We’re not just talking about newbies, either. Whether you trade Forex for a living, as a hobby, or just for fun, the odds are stacked against your success. That is a simply amazing fact. However, the remaining 5% of Forex traders somehow manage to break even and there are a lucky few who actually make money in the Forex market, consistently!
As the TV show says… “How did they do that, anyway?”
Those are the million dollar questions, aren’t they? Countless books, seminars, and exhibitions have been organized to answer this very question. That sad fact is that thousands of books have been written and countless seminars and interviews have been conducted in an attempt to answer the magic questions. The reality of the situation is that there is no magic formula; nobody just holy grail of Forex trading.
So what do successful traders do that the rest of us just haven’t understood? They have mastered a win-win process where they combine and customize various factors to produce consistent results. They have dominated the negotiation process.
The negotiation process is:
Strategy > Money management > Self control
Here are some simple Forex education tips to help you master the forex trading process:
Success Tip #1: You Must Have a Plan
You should have a written business plan that will detail all aspects of your negotiation. When to trade, how much to risk, entry and exit strategies are just a few. To become a consistent (profitable) Forex trader, you must plan your trade and trade your plan.
Simplicity rules! Don’t make this plan too complicated. One sheet of paper for your mission statement and one for your business plan should suffice. Anything else is probably too complicated.
Success Tip #2: Focus on your personal psychology
Knowing yourself will allow you to master the discipline necessary to execute high-quality trades with sound money management techniques. Lack of discipline is fatal in Forex trading. Take a personal journey to identify your attitudes towards risk and money. Get familiar with your strengths and weaknesses as a trader and incorporate strategies into your trading plan to minimize those weaknesses and maximize your strengths.
Different personalities lead to different business styles. Familiarize yourself with all the different styles and over time you will start to gravitate towards a particular style. Don’t fight the urge like I did. I insisted that I was a day trader, but only got limited results. I found that my win percentages were much higher when I entered swing trades. Guess what my bread and butter strategy is now!
Success Tip #3: Be Realistic With Your Expectations
This is hard, I know! I’m on the internet every day and the amount of advertising is staggering. Brokers offer free education (fox in the roost if you ask me), forums on all different trading styles and viewpoints. The gurus push their system as “the only one” that will make you big money. How do you get past all that noise?
Let me tell you loud and clear right now: everyone is right and everyone is wrong. You must make a personal commitment to becoming a successful trader, find a trading style that works for you, and expect a slow and steady approach to wealth creation through Forex.
What works for me may not work for you. Expect to go through an exploratory period where you are both learning and exploring yourself as a trader. Keep an open mind and don’t pay attention to all the noise out there.
Success Tip #4: Exercise Patience
Rome wasn’t built in a day and neither will your trading account. In fact, I tell all of my students that as they study to become successful Forex traders, they shouldn’t just look at their account balance as an indication of success or failure.
Tracking and increasing your percentage of high-quality trades you execute is a much better barometer of your progress than your account balance. Cause and effect rule here. Over time, when you increase your odds by executing high-quality trades, your account balance will respond accordingly.
Stay focused on the process and over time your results will blow you away.
Success Tip #5: Money Management is the Top Priority
I would rather have a shaky strategy and great money management techniques than the other way around. This topic deserves its own blog post to do it justice. Your limited exposure (read “risk”) allows you to stay in the game and allow the laws of probability to work.
Let’s take a casino for example. They need players who frequent their slots to win money. Because? They have a game that has more than 50% chance of winning money for the house. The more people play the slots, the higher the casino’s profits will be.
The casino controls risk by using pay tables (always in the house’s favor!) and increases their odds by keeping players on the slots (read “free drinks”). As a trader, you should limit your risk by only committing 1% – 3% of available capital to a single trade. When you execute enough trades with a high probability strategy, you can also clean like the casinos, but only by staying in the game for the long haul.
In conclusion, trading Forex is not easy. It is hard work and will test the limits of your patience and perseverance. If someone tells you otherwise… beware buyers! It can be a very rewarding and profitable venture if done correctly. In the end, it’s a profession that requires a learning curve and hands-on experience, not unlike that of an airline pilot or engineer. Understanding how to approach and learn this game will allow you to reap all of the advertised benefits. It’s yours currency education You will master the Forex Trading Process.