Forex trading can be a lucrative side hustle or a full-time job. Not everyone can excel at it, though. It requires some work and unique skill sets.
Here are eight essential skills that most formidable traders have in common:
1. Astute analytical mind
The market is all about the numbers. You cannot run from them. As a trader then, you will need to be able to read and analyze data quickly.
Automated tools can help churn numbers into graphs and charts. However, you still need some analytical prowess to look through these and identify market patterns and trends.
Strong mathematical and analytical skills enable you to quickly break down your currency pairs and figure out potential gains and losses. You then can better determine how much you want to trade.
So, to be able to understand different trading concepts and carve out your own winning strategy, you will need a sound, analytical mind.
The faster and easier you can grasp the data, the more proficient you will be in converting numbers to dollars.
2. Diligent record-keeping
In order to train your analytical skills, you will need data, lots of it.
The data should be accurate, thorough, and properly archived. This requires meticulous record-keeping and diligence on the trader's part.
A detailed record of all your trading activities is critical to establishing an overview of your transactions. It provides the historical perspective you need to analyze the effectiveness of your trading approach.
The data can help to provide insights that will enable you to identify market opportunities and areas to improve your strategy for better gains.
Things can get really messy really fast, especially in a highly-charged forex market. You need to stay on top of your data before you lose the plot.
3. Discipline, discipline, discipline
Even a good trading strategy will mean nothing if you do not have the discipline to stick to it.
This is especially important when you experience a tough day on the trading floor. Discipline can help keep you on the right track amid the chaos.
Keeping a trading journal maintains accountability. It reveals whether you had the discipline to stay with the plan or stray under pressure.
4. Mental stability and stamina
The highly volatile forex market can be stressful. It requires the stamina of a marathon runner.
Step back when you feel things are starting to spiral out of control. There is no shame in calling timeout and returning to the market only after you are able to regroup.
Meditation can help clear your mind from distractions and build the resilience your mind needs to endure harsh market conditions. It also calms your nerves and helps you stay focused.
5. Know the basics
It suffices to say one should never trade on the forex market without first understanding the fundamentals.
Do the research, study the market, and decipher the jargon. Then put in the time and practice.
When you have established a strong basic understanding of forex trading, expand your knowledge to encompass more than one currency pair.
6. Stay calm, focused
This is probably stating the obvious, but forex traders need to have composure and remain calm even when the market is running amok.
Let your emotions get in the way and you will end up making hasty decisions that may bring on even bigger losses.
To ensure you do not bring your emotions to the trading floor, establish an entry as well as exit level. Then let these guide you so you do not trade on impulse.
7. Patience gets you the prize
When you have set the entry and exit levels, you then need the patience to wait for the price to hit those levels.
Have the patience to stick to your plan, no matter how bad the market seems.
No amount of knowledge or experience can predict the movement of currencies with absolute accuracy.
You need to be ready for any scenario and have the patience to follow your trading plan.
Be adaptable. Always aim to improve. Assess your trading strategy and continuously make tweaks where necessary. Patience is key before you can obtain a system that is resilient.
8. Never stop believing
No matter how bad or chaotic the market may look, stay confident.
You have put in the time and sweat to build up your trading proficiency. You then need to believe your knowledge will help you navigate through even the shakiest of market current.
You inevitably will feel the urge to abandon your trading strategy when the going gets rough. This is where self-belief is key.
Establish your own identity as a trader and know the objectives of your strategy. Focus on your personal targets because only you can decide how much risk you want to take.
Forex Trading involves significant risk to your invested capital. Please read and ensure you fully understand our Risk Disclosure.