A lot of times people ask what skills are needed to trade forex successfully. While the first two things you need to have are a good understanding of the market and a good strategy, there are other very important elements to trading. And this blog is all about those.
There are four skills or strengths that are incredibly useful to have when trading in the forex market. They all come in handy during different parts of the trading process so let’s get to it.
This is important to have covered even before you enter the market. Research is the good trader’s preparation for a winning trade. It’s the only way to set yourself up for success.
Research involves keeping up with the latest financial news from around the world as well as staying up to date with any new strategies.
Most serious traders will keep tabs on all the important scheduled financial releases by maintaining a calendar of all such important events.
This technique is also helpful because it allows traders to be prepared for the upheaval that generally ensues after major economic releases. And that not only ensures that they are not caught off guard, but gives them an edge.
Given below are some of the main releases that everyone should watch out for. Depending on the region and currencies you usually trade, you might want to add some more to this list:
- Interest rate decision
- Consumer confidence surveys
- Retail sales
- Business sentiment surveys
- Industrial production
- Manufacturing sector surveys
- Trade balance
2. Analytical Skills
Of course just reading a report does not cut it. A trader has to be able to analyze the information provided and anticipate what it will mean for the market.
Secondly, in order to understand charts and get actionable information out of them, it is important to be able to analyze them properly.
So, once a trade has been entered this is the skill that will make the difference between a win and a loss.
Price charts can be very overwhelming at first glance but training your mind to consider shorter intervals and understanding price action and patterns is crucial in Forex trading. In fact, not getting overwhelmed by the market in general is important, but more on that a little later in this piece.
Be it your strategy or the hours you choose to trade, discipline in trading will take you far. Discipline is required to remain consistently profitable in the market. Consistent profits are the main measure of success in forex and discipline will help you achieve it.
Discipline includes focus, punctuality, decisiveness, and risk management. These are all qualities that might seem very boring to most people, especially since Forex has acquired the reputation of a thrilling adventure, but the truth of the matter is that these are the habits that lead to success in the market.
You will often hear people say that successful trading is usually quite boring. Doing something risky might lead you to a good profit once or twice but it’s not healthy to always be teetering on the edge.
Having discipline means sticking to your stops and take profits. It means sticking to the risk management strategy you came up with and the position sizes you know you can safely trade.
It is easy to get swayed by market conditions and let emotions get the better of you but that is what leads to losses. This brings us to our final point.
4. Focus and Emotional Detachment
Overcoming emotions often proves to be the biggest challenge in Forex trading. All emotions have the potential to hurt your trade by getting in the way of reason.
We have done a detailed piece on the psychological pitfalls that one should look out for when trading. You can read it here.
Anger, fear, hope, greed, envy are all emotions that will make you move your stops, stay in trades for too long or leave too early and make you take on revenge trades.
So, the ability to not lose focus and staying calm in stressful situations when it comes to trading is a very important skill to have.
Like Discipline, emotional detachment from trading will also mean success and better results in the long run.
These were the four crucial skills every trader should be looking to hone when stepping into the Forex market. We hope this was useful.