Trading is a lot like any other endeavour in that new and aspiring retail forex traders look up to the pros and anyone who has already found lasting success trading world currency markets. It’s really not un-like how aspiring athletes, artists, political figures, or musicians revere and strive to be like their professional heroes.
But here’s where trading might indeed be different: Retail forex traders can readily learn and copy the same tendencies the pros use to help promote their own success. So while amateur golfers can’t suddenly match the power and driving accuracy of, say, Adam Scott or Rory McIlroy, retail forex traders can emulate the pros in (at the very least) these four functional areas and will likely become more consistent and successful over the long term for it.
There’s a popular misconception that the world’s best traders are constantly active in the markets and somehow spot trades that less-experienced traders don’t. But in reality, successful, longer-term swing traders tend to exhibit the kind of patience and selectivity that retail forex traders can (and should) emulate in their own trading.
After all, it’s only intraday traders that fly into and out of the markets at breakneck speed. Longer-term traders have the time—and should have the wherewithal—to wait for patterns to complete, or for key support and resistance levels to be properly tested, or even for confirmation signals to flash (possibly on multiple or higher time frames).
Really follow or study the actions of professional swing traders and you’ll see that quite often, one or more days will pass without a qualifying trade signal. So if you’re forcing trades out of boredom or because you think you “have to be” in the market at all times, try copying the pros instead, and become as selective as they are with respect to trade selection.
An expert trader who I personally respect once wrote that “Wealthy traders are patient with winning trades and enormously impatient with losing trades.” By that, he meant that the best traders will not, under any circumstances, violate their trading rules to either give a losing trade more room to “turn around,” or to cut a winning trade off early, perhaps out of fear or emotion, or because of something they’ve seen or heard in the financial news.
I find that too many retail forex traders exhibit exactly the opposite tendencies, though, and are often apt to move a stop loss “just this once” because of bias, or some “feeling” they have about the set-up. In addition, retail forex traders, while anxious to book their hard-earned profit, are more likely to exit winning trades too soon as well.
So you see, it’s not that pros and experienced traders take better trades than retail forex traders; it’s that they do better to minimize losses and avoid losing trades, and squeeze a bit more profit out of their winning trades. How they do it, though, isn’t a big secret: It’s all to do with prudent trade selection and stringent money management, both processes you can easily learn and follow if only you make a commitment to it.
See related: 5 Mistakes New Traders Make Every Week
I’ve known successful traders who were the “fiery” type. You know, pounding on the desk, throwing out foul language, and even smashing keyboards or their mouse during a fit of trading-induced anger. So when I say that the pros are better than retail forex traders at “accepting results,” that’s not what I mean. The difference is this: Even if they’re furious about it, the best traders won’t let the previous trade affect their next one.
With that, they won’t trade larger size or adjust risk parameters higher in an attempt to “make up for” the last trade. Instead, they’ll remain committed to both the validity of their strategy, and their pledge to trading it consistently for the long term.
Rather understandably, in fact, new retail forex traders are particularly “rattled” and adversely affected by the results of their trades, both winning and losing ones. The problems start, though, when that emotion spills over into subsequent trades, causing misuse of capital and risk, leading to missed trades (or at least mismanaged ones), and even making some go “on tilt” and throw rules out the window while chasing ill-advised trades and quick profits.
The message for retail forex traders is this, then: Emotions can run high in trading, and that’s OK. But until you learn to harness that emotion and keep it from affecting your next trade, take a timeout if ever you’re rattled and need to collect yourself and your thoughts. It’s in your best interests over the longer term, anyway.
Regardless of your chosen trading strategy, methods, and even the market(s) you trade, one of the “intangibles” that helps breed good traders is a healthy thirst for knowledge about the markets and trading. And really, what better way to build knowledge and understanding than to methodically track and study your own, real-world trades and trading results?
Professionals and successful retail forex traders, almost universally, do this by keeping careful records of their trades and writing down meaningful information and the lessons they learn in a trade journal, which is a tool we’ve discussed at length before.
Trading well for the long term is about consistency, repetition, and continually refining (not changing) your methods to improve outcomes and performance. So learn to properly journal your trades immediately afterwards, and make a point to analyse performance at the end of each week (or month). That’s how you conduct your trading more like a business, much the way the world’s best traders do.
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