Why is the failure rate so high for financial advisors? Providing financial advice is a sink-or-swim business where an advisor’s income is largely contingent on commissions. Some advisors simply cannot earn enough commissions to make a go of it.
While the failure rate is also high for those who attempt to trade Forex full-time, the reasons are different than financial advisors. Discipline and patience. These are traits of successful Forex traders; unfortunately, not enough traders have them.
Here are some of the traits of successful traders.
1) They Live in This World
Living in this world means having realistic expectations and being honest with yourself.
Honesty with one’s self-means understanding what your goals are and whether they’re realistic. If you’re trading with less than $10,000 in your account, most likely you’re not going to be trading full-time for the time being. Some traders are extreme risk-takers – gamblers if you will – who are willing to risk it all. This is not a foundation for serious, measured, successful trading. Establishing a budget that you’re comfortably willing to trade is a good starting point. Ask yourself whether you can lose all of what you’re using in this budget; if the answer is yes, then proceed with caution.
2) They Understand What Forex Really Is
If someone is trading Forex and doesn’t understand it, they are blissfully ignorant. Understanding the basics of Forex – which is possible through many good courses online – is a requirement before getting started in Forex trading.
3) They Have Established A Strategy
Everything is strategic in business whether we like it or not. It’s worth noting that strategy in business is rooted in strategy in warfare. Clearly, business isn’t warfare, but it is an arena where you’re competing with others.
Thus, when developing a forex strategy, a trader needs to know whether he/she is a contrarian or a ‘wave-rider’. If you’re a contrarian, you’re countering the trends; if you’re riding the waves,you’re trading with the trends. Choosing one of these to start makes sense so that you can become an expert, but there’s no requirement to exclusively use one over the other.
4) They Plan
How many times have you heard a small business person with a great idea, but no business plan? When asked why he doesn’t have a plan, he says, “it’s all up here” (pointing at his head). This is evidence of someone who has implicitly admitted he doesn’t know much about business.
To be successful in Forex, a trading plan is a must. Creating a plan is straightforward; there are many templates available online. The plan must always link back to your strategy. This hopefully ensures that you’re staying on track in your priority areas. The plan will help the trader stay away from the excesses: excessive trading, excessive leveraging and being excessively emotional.
5) They Record Their Trades
Knowing how well you’re doing isn’t just a feeling, it needs to be backed by clear evidence. Ergo, recording one’s trades is as important as having a trading plan. In some instances, traders become so confident that they think they’re hotshots. They think, “I don’t need to plan anymore; I know what I’m doing,” or “I don’t need to record my trades anymore; I know what I’m doing.” Discipline, discipline, discipline. Discipline includes both sticking to the plan and recording your successes and failures. Businesses keep records of their transactions; if a trader is acting a like a business person, he/she certainly can find the time to record their transactions and determine their level of success.
6) When Starting, They Simulate Trading
Anyone getting into Forex trading should try simulating trading without using actual money. Many trading platforms offer “demo-accounts,” which allow a trader to pretend being a trader without actually spending money.
This approach sounds silly to some, but practicing what one does before jumping into prime-time is common in a range of activities – from sports to prepping for a media interview. Practice may not make perfect, but it certainly puts you on a trajectory for success.
7) They Manage Risk
Risk management is common in a variety of areas of business and Forex trading is (or should be) no different. As with any investment, a trader should not put in more money than he/she can risk losing. If traders are asking themselves how much they can afford, they are managing risk; if they don’t ask this question, they’re setting themselves up for disaster.
8) They Understand Traders’ Mindset
One key difference between a successful trader and failing trader is how they view Forex trading. Successful traders tend to see their work as a business that includes measured risks. Failing traders try to get rich quick and often lose big.