How to become a Good Forex Trader? What Is the Secret?
Posted by Forex Trading Expert on
I am a good trader, because…
1. My Trading System Is Simple and Easy to Use
I have never tried to invent something new in Forex trading. I never tried to reinvent the wheel. We already have everything we need to trade and make money. All of the tools we need are accessible for free. Why should we make our lives too complicated?
So I kept everything simple from the first day, and I started getting good results very soon. I did not try different indicators, because I did know that if I wanted to do it, I would have to spend the rest of my life on it. There are zillions of indicators, trading systems, and… . But there are some simple and easy to use tools that have been already tried by thousands of traders, from Japan to USA, and it is proven that they work. So I used those tools and forgot about the others.
2. I Am Disciplined
I simply use what I have learned and the tools I have. I am not looking for anything else. I do not let any emotions interfere and make me decide wrongly. I check the charts and I place the orders if I see a strong signal. It is as simple as that. There is nothing complicated about trading. Everybody can do it.
As a Forex trader, I don’t spend more than 20-30 minutes of my time on checking the chart every day. Professional trading doesn’t mean spending several hours at the computer and analyzing tens of charts and time frames. Checking the daily time frame of the currency pairs and stocks that you follow, is what you have to do every day. If there is any trade setup, you can see it instantly because a strong trade setup yells on you to take it.
You should also check the weekly time frames every weekend and the monthly frames once the new monthly candlestick opens. These are the strongest time frames and the trade setups they form can be so profitable.
Doing all of these, can’t take you more than 20-30 minutes per day. If you are spending more time on analyzing the charts, then I can say that you are not a profitable trader yet. If you are trying to convince yourself that a strong trade setup is formed while you know that it is not a strong, then you still need more time to learn and become a disciplined trader.
3. I Wait for the Best Setups
Some weak trade setups form on the charts every day. Those setups are for the traders who want to lose money. They are not for the professional and experienced traders. So I leave those setups for the others. I wait for the best and strong setups, and fortunately they always form. They form not as frequently as the weak setups. But they are enough to make some profit every now and then.
Having no strong trade setup doesn’t make me upset. It is a long time that I am used to it. We are not supposed to have strong trade setups every day.
4. I Strictly Use a Reasonable Stop Loss
Stop loss is one of the most important things in trading. Those who do not set a stop loss will be out of the game sooner than later. You can easily wipe out a million dollar account with just one position, if you do not set a proper stop loss. I have seen someone who wiped out a 7 million dollar account, because he foolishly did not set any stop loss and a proper risk management, and emphasized that his positions were correct and the market would finally turn around to follow his favorite direction. The market did turn around, but when his account was already blown up.
Your trading system should tell you about the best and most optimum place to set the stop loss, otherwise you should look for another trading system. For each of the positions you take, you should set a proper and reasonable stop loss which is not too tight or wide. You should not widen your stop loss when the price goes against you and is about to hit the stop loss. Also, please note that a too wide stop loss is like having no stop loss. And a too tight stop loss causes you to lose money even when your position is correct.
To stay away from the emotions, I don’t check the charts when I take a position. Checking the charts when you have open positions can trigger the negative and harmful emotions that cause you to make mistakes. When you see your position is losing, you get emotional and you close your position not to lose more, or you will widen your stop loss because you are afraid of losing too early and you want to give your position more time. When your position is making money and you are watching it, your emotions can cause you to close the position, because you think it is possible that the market turns around and you lose the profit your position has made.
I don’t get emotional so easily, however I prefer not to check the charts and my positions. I take the positions, set the stop loss and target and then I come back the next day.
5. I Do Not Add to My Bad Positions (Averaging Down)
Instead of trading and making money, some people always try to prove that they are right, or they try to break the others’ records. Therefore, when they take a position and it goes against them, they take more positions probably to hit the market turning point finally. However, in most cases the forex market keeps on following the same direction and these traders will lose all they have in their accounts. This is not trading. It is gambling.
A good trader is not someone who doubles his account every month. You can double or triple your account by averaging down if the market turns around finally and you close all your positions with profit. However, you will wipe out your account the next time that you repeat this method because the market is not supposed to turn around every day. Strong trends can be continued even for years. A good trader is someone who properly follows the markets strong movements and trends. That is the key secret.
6. I Do Not Over-Trade
Over-trading is another syndrome I see among novice Forex traders. Over-trading does not help you make more money. It causes you to lose your money faster. It is possible that you double your account within a short time through over-trading, but you will wipe out your account the next day, because you are not going to be lucky every day. If you trade based on luck, one day you win, and the other day you lose all you have already made.
7. I Do Not Risk Too Much Money
I am not greedy at all. I do not try to become multi millionaire and make millions of dollars every month. It is possible to make millions on the paper and with the demo account, but live trading is different.
I never open a big account to make my broker greedy. I trade with a small amount of money, raise it into some reasonable amount, and then withdraw most part of it and leave a small amount in my account again. I always do this.
I enjoy growing a small account. I do not like to have a million dollar account and make $50k every month, withdraw the profit and leave my capital there. This is too hard when you trade through retail brokers.
After several years of working and gaining experiences, my trading buddies and me came to this conclusion that we’d better to grow small accounts, instead of having a big account. This is much safer, and besides, it eliminates the harmful emotions, specially fear.
You can save your profit and turn it into a huge capital after a while. Then you trade through a bank account. This is what professional traders do. You have to be happy with a small account and small profit while you have to trade through the retail brokers.
8. I Do Not Compete with the Other Traders
In Forex trading, it is ridiculous to compete with the other traders, because any trader has a different style. Any trader looks at the market from a different angle, so traders can not compete with each other.
While a conservative trader makes only 100 pips profit per month, another trader makes 800 pips. Both of them are great, and one can never say which one is better, because both of them are disciplined enough to follow their own trading system and style, which is what a professional trader has to do.
I know myself as a good trader, and I do not try to compete with a friend who trades more than me and makes more money. We are both good, but just our trading style is different. Trading style has a direct relationship with personality. As everybody has a different personality, no one can compete with another trader in trading.
9. I Do Not Try to Make a Living Through Trading
This is the most important secret my mentor taught me the first day. You can’t make money through Forex or any other kind of trading when you HAVE TO make money. Trading is an investment opportunity to grow your wealth, not a good way to make a living.