You do not need to have a degree in astrophysics to make money from Forex trading but being a smart trader will help. Retail Forex trading is not difficult, it just requires traits which humans find difficult. Ask any human what their attributes are, and rarely will you hear discipline and patience mentioned!
Have you every heard your parents say that to you as you rushed around the house as a wee little nipper? What they are helping you to understand is that speed does not necessarily equal a faster resolution. Sometimes slowing down will get you the same result. A smart trader knows this too. Rather than pursuing every trading opportunity aggressively, why don’t you let the market come to you?
If you have already created your Forex trading plan you can take advantage of events rather than reacting to them. This is how a smart trader makes money. They take the low hanging fruit. This approach is one of the principles of a risk-adjusted return. Rather than taking lots of risk for a return, you only expose a small amount of your portfolio in one position. We recommend only taking positions of 1/2% of your portfolio. This means that if a Black Swan event occurs you have only lost a small amount.
Knowing when to buy and when to avoid is about being disciplined and sticking to a trading plan. Too many traders use their emotions to decide when to buy and sell. If you get into a mindset of making small regular profits whilst taking small risks, your profits will accumulate. Learning to take a profit and not ‘seek more’ from the trade is where the discipline also comes in. Ask yourself why you feel the need to ‘push it’? Are your emotions to prove yourself so powerful that you would pass the chance for a small quick profit?
You will lose money trading. This is a fact. How you handle this will define how successful you are. A smart trader will analyse how and why they lost money so as to ensure this does not happen again. There is no such thing as a bad trader. But there are poor traders who repeat the same mistakes time and again and lose all their money. Which one are you?
It can be difficult to be patient when Forex trading. You have placed your trades and they are going up. What do you do? Stare at the screen and count how many Lamborghini’s you are going to buy? Learning to be patient and letting your trade play out is an important part of being a Forex trader. Being patient does not come naturally so don’t expect to be good at it from day one. The worst thing you can do is get fixated on your trades. This will cloud your judgement. In turn this may stop your identifying new opportunities or make you close out profitable ones too early. No-one gets it right first time but developing an inner-zen is something you should focus on.
Learning to detach yourself from trading and keeping a sense of perspective is an important part of currency trading. This is easily done by using set and forget. Indeed for the already smart traders among you will know to use the risk-reward ratio. This ratio minimises your risk whilst allowing you to profit. It combines good risk management practise while also allowing you to enjoy your life away from trading.
Few are born as smart traders. Becoming sensible happens with time and experience but also being receptive to learning helps. Learning to analyse your Forex trading weaknesses is the first step. To paraphrase a famous saying: What doesn’t kill your account makes you (a) stronger (trader)!