What Really Makes A Successful Forex Trader?

By Author: Sofie Akinshina
Total Articles: 12
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Insights from a hedge fund trader

There are certain distinct areas that tend to differentiate a successful profitable trader to roughly 96% (use a pie chart illustrating the 96%) of those that lose on a successful basis.

Business

Regardless of whether you trade/invest as a full time professional or on a part time basis you should conduct it in the same way. This essential means that you need to be fully aware of which type of participants, contribute to the demand and supply of the market and their trading thesis.

Discipline

Trading discipline does not only involve knowing when to trade but specifically following your trading plan, which should cater for extreme situations that may occur in the market and affect your system. Your discipline approach should demonstrate a sound understanding of key psychological trading rules such as, not chasing trades, limiting risk and preventing compulsive trading.

Money Management

Your risk management strategy should illustrate the specifics behind how you will manage risk, during a trade. My tried and tested rules for this important area are: ...
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1. Determine how much you are willing to risk on each trade.
2. Understand the risk of the trade you are about to take and size the trade appropriately.
3. Track the trade going forward.
4. Pay attention to your risk points: take small losses before they become big losses.
5. Review your performance.

Trading Journal

One area that all professional traders have in their tool is the importance of a trading journal. This is a plan where you document each trade that you execute, the asset class, price of entry and exit, P/L and the evaluation. The reason why this is so beneficial and a must in your trading arsenal:

1. It helps you to identify the areas that you are going wrong
2. You can spot certain flaws or positive characteristics with your system
3. It helps you to make the necessary changes to improve the trading system
4. It enables you to review your trading development and progress on a regular basis

Conviction of trade

Trading is all about defining the trades and seeking only high probability opportunities. The key to trading is waiting for the trades that have a fantastic set of risk to reward ratio. Essentially, it means cherry picking your trades, which will increase the potential of great returns.

Ken Ike is a professional trader and portfolio manager at http://forexsignalsmanaged.com. He own runs a free forex signals service, where clients can get our trades copied into their account.