Author: Chris Miles

What Is An Opportunity Mindset And How Can It Benefit Traders?

Entering the trading world can feel at times like a voyage into the unknown, and even people with extensive financial experience know that for all that you can predict in this world, nothing is entirely certain.

 

Different traders will have very distinct responses to that revelation. For some that can be intimidating, especially if they are working in a proprietary trading firm and thus the money they are trading with is the firms’, and foster a fear of failure.

 

Others will respond very differently. Some traders, particularly during the one-step evaluation process for funding, will see this as a way to test their short-term and long-term planning. Others will relish the chance of testing their skills against the variable weather of the market and see any knockbacks as lessons to be learned.

 

There are all different mentalities, and whilst there is so much in both trading and life that we cannot control, one aspect that is within our control is our reactions, responses and mindsets.

 

Adopting a mindset where you see opportunities instead of challenges, lessons instead of failures and development instead of deficiency is not only an exceptionally helpful way to get ahead, it is an absolute necessity for traders who want to maximise their success.

 

In this guide, we will explore what an opportunity mindset is, how it benefits traders both personally and professionally, and explore how to develop an opportunity mindset.

 

What Is A Mindset?

 

A mindset is something everyone has and uses in almost every moment, often without realising it and how much it affects our decision-making.

Whilst there are slight variations on this definition, a mindset in psychology is the set of beliefs, values, attitudes and dispositions that shape how we interpret and respond to a given situation.

 

Mindsets are huge, often very complex mixes of past experiences, subconscious biases and collections of information from various sources that act as a filter that help us to prepare and respond to a situation.

 

Every thought we have is governed by a mindset and by extension the many, many factors that build up that mindset, from what we eat, to how we interact with friends, colleagues and romantic partners, to how we respond to adverse events in our lives both then and in the future.

 

For example, in education, if you receive a lower grade than you might expect, one potential mindset would see this as a sign of failure, which can lead to a negative feedback look and affect overall progress and attainment, whilst another mindset would see this as a target for improvement.

 

This is the difference between a fixed and a growth mindset. Fixed mindsets believe that their fundamental traits are set in stone, success is a result of inherent ability and failure is a signifier of inherent limits. Fixed mindset people prefer to stick to what they know because success is more certain that way.

 

Growth mindsets on the other hand believe that anything can be improved through learning, perseverance and doing the work to build up skills slowly, and failure is not encountering adversity but giving up in the face of it.

 

Finding Opportunity In Crisis

 

An opportunity mindset is a variation of a growth mindset which takes the core principle of learning, improving and building oneself up through effort and learning lessons from past events and expands on it considerably.

 

It is seeing the window that opens whenever a door closes, it is the realisation that every challenge, even ones that are unsuccessful, makes you better in some way than you were if you had not tried it.

 

The difference between a growth mindset and an opportunity mindset is that whilst a growth mindset focuses on the process of building up towards success, an opportunity mindset is about finding strength and new chances directly through adversity.

 

Michael Jordan, the legendary basketball player, summed up his career by saying that the reason he succeeded is because he failed over and over again.

 

For some people, getting into trading after facing redundancy or professional struggle was in itself an example of using an opportunity mindset, as they resolved to learn trading skills and build themselves up to pass the evaluation.

 

A lot of the most inspirational stories of startups and self-made people often involve an opportunity mindset. In a lot of cases, startup founders try (often many times) and fail but in a way that directs them towards ultimate success.

 

Facebook started, quite infamously, as a clone of the website Hot or Not before evolving into a college-based social media platform that later took over the world. Airbnb was initially a stopgap to ensure that Brian Chesky and Joe Gebbia could pay rent.

 

Rather than see failure as catastrophic, an opportunity mindset sees it as part of the path to ultimate success, and that approach can be achieved with the help of five simple steps, as imagined by Jayson Demers and applied directly to the field of market trading.

 

Step One – Inoculate Yourself To Failure

 

Life throws curveballs at almost every one of us almost every day, but we seldom notice unless it affects us in a particularly intense way.

 

After all, stocks oscillate in price; they do not follow a straight line up or down but instead will constantly be gaining and losing value. If we worried about every microloss it would be impossible to trade properly.

 

So the best way to handle losses is to accept that not every single trade will “win” or gain more than its initial investment. By accepting that losses are to some extent inevitable, you inoculate yourself against loss aversion and can have a far more accurate perspective on your progress.

 

After all, a string of losing trades does not matter if you make a trade so successful those small losses are wiped out in an instant. It is about perspective, intensity and the bigger picture.

 

Step Two – Discard The First Thought In A Crisis

 

First impressions are incredibly important in any situation, as they not only shape our initial reactions but can often calcify our mindset to a particular moment, which is perfectly fine when a flight-or-fight response is vital to survival, but in other cases can stop us seeing the opportunity in a problem.

 

If a stock starts to tick downwards it can create a cascade of emotions that can flood into a disproportionate and unhelpful response, creating worries about whether you should realise it, what it means for your long-term strategy, or whether it could have a knock-on effect on other stocks.

 

That first reactive thought, sometimes referred to as a “System 1 thought” is your instinctive, unconscious reaction, and it’s not always the best one to use. Sometimes it is best, no matter how difficult it is, to discard it and wait for your logical System 2 thoughts to take hold.

 

The best way to do this is to not consider losses or gains emotionally, and this can take some time and some training to get used to. Try it on smaller-scale challenges such as a reaction to knocking a glass over or accidentally making a spelling mistake in an email and work your way up.

 

It is okay to find it difficult; we have these strong emotional reactions for a reason after all.

 

Step Three – Depersonalise Decisions

 

Are you a person who gives fantastic advice, either personally or professionally, but can struggle when facing the same situations yourself?

 

Do not worry, you are far from alone in this matter, but a potential solution is to cut away the personal implications of the decision and think of a trading decision from the perspective of someone else that you are advising.

 

Instead of wondering whether you would be missing out if you did not jump onto a rocketing stock (a common instinctive FOMO reaction), ask yourself if you would suggest someone else invest in that stock. 

 

Step Four – Isolate The Objective From The Imaginary

 

The antithesis of an opportunity mindset is a slippery-slope mindset, which is the tendency to catastrophize and exaggerate the potential consequences of actions.

 

It is a vestige of our early survival instincts, as it never hurt anyone to over-prepare when a lack of preparation meant death, but on the trading floor and in most aspects of modern life, it is not only unhelpful but can be actively harmful to trades and your mental health.

 

The best way to remove the power of imaginary exaggerated threats is to write down a list of the consequences of any challenges, as the process of translating your thoughts to writing and actualising them removes their power and reveals that there was far less to fear than originally believed.

 

Step Five – Focus On The Next Step

 

Continuing from the concept of System 1 and System 2 thinking, a beneficial side effect of waiting for that second thought to spool up is that you see the opportunities and improvements that can be made rather than the frustrating problem at hand now.

 

Instead of looking at the stock losing value, take time to explore your trading plan and your contingencies. Stick to your stop-loss orders and consider a holistic view of your portfolio and its diversity. Losses often feel more painful in the moment than they are in the long run.

 

If necessary, stop trading for the day and give yourself time to go through this process of preparing for the next step and the next day.

3 KEY DRIVERS OF THE FOREX MARKET EVERY TRADER SHOULD KNOW

Trading the forex markets is a dynamic and exciting process, and also a steep learning curve. The internet has opened up a truly global forex marketplace where billions of dollars are traded each day. It is no longer an exclusive club open only to a handful of elite bankers, but can be accessed by anyone with a computer and an internet connection.

 

However, the wider playing field is highly liquid and competitive, and it’s essential to have a sound trading strategy if you want to give yourself a good chance of making steady profits.

 

One of the best ways to prepare yourself for a trading career is to gain a good understanding of the factors that influence forex market movement. Here are three key drivers to look out for. 

 

Monetary policy

Monetary policy refers to the actions deployed by a central bank to control interest rates and money supply. Every country has a central bank, such as the Federal Reserve Bank of America, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank. 

 

They have a mandate to safeguard the economy by nurturing steady growth, keeping inflation in check and maintaining high employment rates. The main way they are able to do this is through monetary policy. They are able to set the base rate of interest, which means the amount of interest that is added to loans and is accumulated through savings. 

 

Central banks can also control the amount of money that is in circulation at any given time to regulate the economy and help prevent it from overheating or becoming too sluggish. These factors have a huge influence on the forex markets. 

 

There are two main types of monetary policy that forex traders should be aware of: expansionary monetary policy and contractionary monetary policy. 

 

Expansionary monetary policy

Expansionary monetary policy is deployed when the central banks want to grow the economy. They can do this by increasing the money supply through methods such as quantitative easing (QE), buying or selling government bonds, and lowering interest rates in order to encourage borrowing, which in turn boosts spending and investment. 

 

This drives up productivity and brings extra jobs so that employment rates are high. During the Covid crisis, central banks dropped interest rates to historically low levels of below 1% in an attempt to shore up the global economy against the effects of the lockdowns. 

 

One example of the effect this had in the UK was to stimulate the housing market, as borrowers took advantage of low interest mortgage deals. Coupled with a complementary government measure of suspending stamp duty, this led to a boom in demand and house prices rose at historic levels. 

 

Contractionary monetary policy

The opposite of this approach is known as restrictive or contractionary monetary policy. They usually take this tactic when prices are rising too fast, as measured by the inflation rate, and the central banks attempt to restrict economic activity. 

 

The main way they do this is by raising interest rates so that borrowing money is less attractive to businesses and private consumers. This discourages spending and investment, so that prices are eventually driven back down. 

 

We are currently experiencing a period of high inflation driven by the aftermath of the pandemic and the war in Ukraine, which has driven up energy and food prices. In response, the interest rate in the UK is currently at 5%, the highest level since the financial crisis of 2008/9. 

 

On the occasions when the economy is ticking over nicely, neither overheating or stagnating, central banks follow a neutral monetary policy to maintain the stability. Monetary policy affects everybody, from the cost of our monthly mortgage payments to the amount we pay for our weekly shopping basket.

 

Monetary policy is a key driver of the forex markets. When a contractionary policy is implemented and interest rates are increased, this drives up the value of a currency, because foreign investors are able to get a better return on their capital, which will involve exchanging their currency for the one relevant to their chosen destination. 

 

Conversely, when interest rates are lowered, a currency depreciates in value because foreign traders will take their capital elsewhere. Therefore, forex traders need to keep a close watch on both the inflation rate and the interest rate of the countries relevant to their currency pairs as this will be a strong indicator of when to buy and when to sell. 

 

Geopolitical events

Politics and economics are closely related, and so geopolitical events can have a knock-on effect on the financial markets. Here are some major geopolitical events to monitor carefully for the impact on the value of your currency pairs.

 

Elections

When a country holds a general election, this is regarded as a time of uncertainty and this creates more volatile trading conditions. This is because a different government may make changes to monetary policy.

 

As we have seen, a country’s monetary policy is the key driver of the forex markets. Some political leaders are concerned with boosting economic growth above all else, while others are more concerned with redistribution of wealth and investment in public services. 

 

Therefore it is crucial to take note of which countries are facing major political elections and to keep an eye on the polls to see if a change of government is predicted. Stay well informed about the ideologies of the major political parties and what their economic policies are. 

 

If there is a strong opposition and their policies are radically different to the current government’s, then this may lead to some turbulence in the forex markets and the devaluing of the currency. 

 

Any political change at all is likely to have an impact, but if the election has been called unexpectedly due to scandal, civil unrest, or political party infighting, then the currency price is likely to be severely impacted. Once the period of uncertainty is over, most of the major currencies will tend to settle again. 

 

Natural disasters

Natural disasters such as hurricanes, floods, and earthquakes are not only devastating for the country’s people, but also for the national economy and therefore the value of the currency price. Infrastructure and factories may be damaged, affecting supply chains and production. 

 

The workforce may also be affected through death, disease and injury that are sadly the result of such events. Large scale disasters can also create mass homelessness and migration. The clean up and rebuilding operation diverts government resources from other forms of investment that would boost the economy and encourage overseas investment. 

 

Wars

Civil wars or international conflicts have a severe and immediate impact on the currency value of the countries involved. Much like natural disasters, wars damage and destroy infrastructure and power supplies, disrupting industry and agriculture. Furthermore, economic and trade sanctions may be imposed on the country for political reasons.

 

The longer a conflict continues, the more the economy is drained and therefore the currency price will be highly volatile. There may be some bounceback once a resolution has been reached and the government invests in rebuilding programmes and seeks to stimulate the manufacturing sector.

 

Trade deficits

The balance of trade between countries is an important indicator of how in demand its goods are. A country with a high demand for its goods will tend to have a strong currency value because it will usually export more than it imports. On the other hand, a country that tends to import more than it exports will usually have a weaker currency value.

 

However, the balance of trade is not fixed but fluctuates over time. This could be in response to seasonal demand, political events, or the supply of raw materials. When a country is buying more goods and services than it is selling to foreign markets, it is described as having a ‘trade deficit.’

 

Some countries are rich in natural resources that will always be in high demand, such as oil, gas, and timber. However, the prices of these commodities fluctuate depending on economic conditions that affect demand, so this will impact the currency value.

 

While a country with a persistent and deep trade deficit may have a weaker currency value, it can be a complicated situation and some countries with strong economies have long standing trade deficits, such as the USA.

 

Conclusion

As well as all of these major factors, it’s also important to keep your eye on the economic calendar to stay well informed about the smaller day to day events that can help to shape your trading strategy. There are plenty of online tools available to help you do this, and many of them also carry a prediction of how volatile the market reaction will be.

 

Utilising this type of data and news to inform your trading strategy is known as fundamental analysis, and you should build it into your daily trading routine so that it becomes second nature. When combined with some technical analysis tools, it will give you the best insight and understanding of the forex markets, improving your confidence and trade outcomes.

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How To Trade The Economic News In Volatile Markets

We are currently living through a time of geopolitical and economic turbulence, as the world deals with multiple challenges. A global economy only just emerging from the battering of the Covid pandemic is under further strain from the ongoing war in Ukraine and instability in African regions. 

 

Demand for commodities such as oil and gas has increased as the world bounces back from the pandemic, while the Russian invasion of Ukraine reduced availability. This led to a sharp hike in prices, with domestic users and businesses hit with higher fuel bills. The price of other commodities such as wheat, dairy and cooking oil has also spiked.

 

The knock on effect has sent inflation soaring to unprecedented levels, accompanied by a series of interest rises. In the UK there has been a period of political instability, with four Prime Ministers in the last five years and frequent changes of Chancellor. The coming year still holds uncertainty as the country is likely to face a general election. 

 

The frequency of natural disasters and the consequences of climate change are also affecting the economic and geopolitical stability of the world more strongly than ever before. Drought is affecting food production in some areas, with wildfires becoming more widespread and fierce in hotter climates.

 

All this naturally has an impact on the financial markets, and this leads to greater volatility. For forex traders, it is important to understand what volatility is, what causes it, and how to navigate trading during volatile times. 

 

What does volatility mean in relation to forex markets?

In forex, volatility refers to the amount the price of a currency fluctuates within a time period. When the price of a currency deviates sharply from the average, either upwards or downwards, it is described as high volatility. Times of milder fluctuations are described as low volatility. 

 

The forex market is known for high levels of volatility. This is why it offers traders good opportunities to make profitable trades, because there are frequent windows to buy currency at lower price and sell at a higher price, or vice versa. 

 

However, high volatility also carries a high level of risk, so it is important to be able to read market movements and make well informed decisions when selecting position size and stop loss level. 

 

While it is never possible to predict exactly which way the market will move, learning how to manage risk and make decisions based on probability will help a trader to avoid some of the worst pitfalls. 

 

Some currency pairs are more volatile than others. The Japanese Yen and the Swiss Franc are regarded as ‘safe haven’ currencies, along with the US dollar. This means that they tend to hold their value even during periods of volatility, so they can help to mitigate some of the risk of trading in turbulent times. 

 

The Japanese Yen is particularly stable because the government keeps the interest rate deliberately near zero levels for complex reasons. The Swiss franc is also highly stable thanks to the country’s gold wealth and a strong central bank and financial system. 

 

The US is the world’s largest economy, at the forefront of technological developments and rich in commodities. The US dollar is also the world’s reserve currency, meaning that the majority of foreign bank reserves are held in the USD. Therefore there will always be a strong demand for this currency.

 

What are the causes of forex market volatility?

The best way to understand the causes of volatility in the forex markets is to follow relevant global events and the economic news. The market is very sensitive to geopolitical factors, which means the interaction between geography, politics and economics at a national and global level. 

 

Follow current affairs with a particular focus on military invasion, civil unrest and uprisings, general elections, and any other sign of instability including natural disasters and pandemics. This can cause investors to withdraw from a currency and sell off existing assets, triggering a period of volatility. 

 

Nations will also sometimes engage in trade wars, setting hostile policies to disadvantage a rival country or region and boost their own prospects. This can occur at any time throughout the world. When they involve major economies such as the US, China, and Europe, the knock on effect on currency prices can be particularly marked. 

 

Interest rates are also a major influence on currency price. The monetary policies of central banks, such as the US Federal Reserve, the European Central Bank, and the Bank of England regulate the amount of money circulating in the economy. 

 

When the central banks raise interest rates, as most have done recently to tackle rising inflation, it makes it more costly to invest in the country, and investors may transfer their money to bank accounts, or sell assets to avoid capital gains tax. 

 

On the other hand, the financial sector, including mortgage lenders, banks, and insurance companies, tend to benefit because they are able to charge more for their services. 

 

When interest rates are lowered, consumers have more spending power, which in turn benefits retailers and the wider economy. It is also cheaper to borrow money, increasing consumer confidence, but conversely this may lead to a rise in inflation as demand for goods and services increases. In response, interest rates may be lowered again. 

 

There are various other economic factors that have an impact on the forex markets to a greater or lesser extent. Some of them are specific to regions, countries, or currencies, so it pays to do some in depth research on the currency pairs you want to trade. 

 

Use the economic calendar to keep track of the significant data releases and events that are relevant to your trading strategy. As you gain experience, you will be able to customise the calendar so that you have the most important information to hand. 

 

Major economies are particularly sensitive to unemployment rates because this is a bellwether of how well the economy is doing—low unemployment means it’s doing well, and a high unemployment rate means that it is struggling and the population will have less money to spend. 

 

The Government will be under more pressure to borrow and spend on social security, and tax revenues will be reduced. Higher unemployment than expected will trigger volatility in the forex markets, as traders look to sell off currencies that they expect to fall in value. Higher than expected rates of employment will drive up demand for the currency.

 

Other indicators to look out for include the following: inflation, the gross domestic product (GDP), the consumer price index (CPI) and business sentiment surveys. 

 

Market sentiment also has an influence on price movement. The term refers to the prevailing mood of traders and investors about which way the market is moving, and this in turn can drive prices up or down in value. 

 

Finally, markets tend to move in a cyclical fashion, regardless of outside influences. If prices have been rising steadily for some time, at some point they will peak as investors sell at a profit. This naturally pushes prices down for a time before they begin to rise again. 

 

How to trade in a volatile market

A highly volatile market suits short term traders, because the market swings create more opportunities for making high profits in a short timeframe. However, there is also the potential for damaging losses to occur, so it’s essential to know your risk tolerance and have a strong risk management strategy in place before making live trades. 

 

It’s not possible for even the most experienced and knowledgeable trader to predict 100% which way the markets will move, only to make decisions based on research and technical analysis. Common technical tools used to measure price changes include Bollinger bands, Average True Range (ATR) and the Relative Strength Index.

 

As previously mentioned, some currency pairs are more volatile than others, and following the economic news will put you in a much stronger position to anticipate market movements. Highly volatile markets are not a bad thing in forex; after all price movement is how profits are made.

 

The most volatile currency pairs tend to be the Australian dollar and the Japanese yen, the New Zealand dollar and the Japanese yen, the Australian dollar and the US dollar, the Canadian dollar and the Japanese yen, and the Australian dollar and the British pound. These pairs are closely related to commodity prices such as oil, timber, and minerals.

 

The least volatile currency pairs tend to be from the largest and most stable economies, and include the Euro and the British pound, the Suro and the US dollar, the Swiss franc and the US dollar.

 

As ever, keeping your emotions in check and being strictly objective in all your trading decisions will help you to avoid taking unnecessary risks. Make sure you have read up on the psychology of forex trading and are aware of the temptations of greed, and the dangers of being too cautious or overconfident.

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12 Frequently Asked Forex Trading Questions

Forex trading is a huge topic and there is always something new to learn. Knowledge is power, especially when it comes to the complexities of the foreign exchange markets. If you are just embarking on your first steps in your forex journey, then no doubt you will have many questions. Here are the answers to some of the most common forex trading queries.

 

What is forex trading?

Let’s start with the most basic question first of all. Forex is a portmanteau word for foreign exchange and refers to the conversion of one country’s currency into another. Forex trading is the process of buying and selling currency pairs on the foreign exchange market with the aim of making a profit. 

 

This is possible because the value of currencies fluctuates in line with market forces, meaning that it is possible to sell a currency at a higher price than you bought it for. 

 

Can anyone trade forex?

Yes, anyone with a computer and an internet connection can trade forex. You will need to source an online broker and open an account, but you do not need to invest large sums in order to do this. Some brokers will require more start up capital than others, so shop around and find one that is suited to your price bracket. 

 

When selecting a broker, research carefully to make sure that they are reputable and well regulated. The broker will take a fee, usually on a percentage basis per trade, so find out what their fees are and how their system works. Look at other services they offer, such as customer support and evaluation programs. 

 

What’s the quickest way to learn forex?

There are lots of free online resources available, including ebooks, webinars, articles, and podcasts, that you can learn the basics of forex trading from. It is helpful to read widely and understand some of the geopolitical factors that influence the value of currencies, such as inflation and interest rates. 

 

You will also need to know how to use some technical analysis tools, such as line graphs and bar charts, so that you can understand price action and identify the best times to buy and sell currency pairs. 

 

How do you develop a trading strategy?

A trading strategy can be formed by studying market trends and setting rules for when you enter and exit your trades. This is usually achieved through a combination of fundamental analysis and technical analysis tools.

 

What is the difference between technical analysis and fundamental analysis?

Technical analysis refers to the process of analysing historical price patterns and statistical trends to work out probable future trade outcomes. Traders use a range of tools, from basic bar charts to more complex Bollinger Bands and moving averages based on mathematical formulas.  

 

Fundamental analysis refers to the wider economic and geopolitical factors that can influence the markets and cause fluctuations in currency price. These include interest rate rises, inflation rates, employment statistics, and events such as elections, wars, and natural disasters. 

 

What is leverage?

Leverage is a finance that is provided to forex traders by a broker. Many brokers offer high leverage, meaning that you can trade with more money than you actually have invested into your account. 

 

This allows you to command larger positions than you would otherwise be able to afford. This brings you the opportunity to make larger profits, but it also carries greater risks. 

 

Why is risk management important in forex?

All forex traders must understand and manage risks in order to protect themselves against making damaging losses with their trades. This can be done by working out how much money you can comfortably afford to lose, and investing accordingly. You should never trade with more than 1% or 2% of your total capital per trade at first. 

 

It is also important to use risk management tools such as stop loss orders, which automatically exit a trade once a specified market price has been achieved. This can protect you from making unaffordable losses. 

 

What are the best currency pairs to trade?

Novice traders are advised to start with the major currency pairs which have high liquidity on the market. This means that they are always in demand and are easier to buy and sell. 

 

The major currencies include the US dollar (USD), the Euro (EUR), the British pound (GBP), the Japanese yen (JPY), the Canadian dollar (CAD), the Swiss Franc (CHF), and the Australian dollar (AUS).  

 

There’s plenty of advice to be found online about which of these pairings work best, but as a rule of thumb beginner forex traders should always include the USD as one of their currency pairs. The USD is by far the largest and most popular currency in the world, and is regarded as a ‘safe haven’ currency that is unlikely to suffer significant and permanent loss of value. 

 

What is the best time of day to trade?

The forex markets are global with no centralised market. This means that they operate virtually 24/7 so there are always trading opportunities somewhere. However, the major trading centres of New York, Tokyo, Sydney, and London trade in overlapping sessions rather than simultaneously. 

 

The most active times of day are at the beginning and end of each trading day, when the sessions are crossing over in different time zones. In the UK, this is the hours between 8am and 9am, and between 5pm and 9pm. The London markets are open between 8am and 4pm. 

 

How long does it take to start making a profit?

There is no definitive answer to this question, because it depends on how much time you have to devote to trading, and your level of knowledge and skill. The amount of capital you are trading with will also affect how much money you are making. 

 

If you have no previous knowledge or experience or forex trading, you can expect it to take at least 12 months before you are making consistent profits. Bear in mind that even the most experienced traders only take a profit on about 50% of their trades, and it does take a lot of time and patience before you will reap the rewards of your labour. 

 

Is it possible to combine trading with a full time job?

Yes, in fact the majority of people trade forex part time, as a side hustle to their main source of income. This is an ideal way to start, even if you eventually want to make trading your full time career. 

 

It usually takes at least several months to develop a successful trading strategy, and it can be a process of trial and error. Therefore if you attempt to rely on forex trading for your sole source of income too soon, you will struggle and this can affect your performance.

 

With a sound trading strategy and the discipline to stick to regular trading hours before or after work and at the weekend, it is very possible that you will be able to supplement your main income with profits made from trading.

 

What is meant by trading psychology?

Trading can be an emotional rollercoaster for the unwary and underprepared, and this can lead to bad trading decisions. All humans have a primal need to accrue wealth and security and guard themselves against loss, and so when we engage in trading it can arouse strong feelings of fear and greed.

 

Greed can drive a trader to make risky decisions, such as holding on to a position for too long or opening too many positions at once. On the other hand, fear can hold you back and lead to overly cautious decisions. Poor outcomes can lead to a downward spiral of revenge trading in the hope of recovering losses.

 

Therefore, before you begin live forex trading it can be useful to find ways of keeping your emotions in check, so that they are not interfering with your decisions. Always stick to your trading strategy even when you are under pressure, and be aware of your own particular personality traits.

 

Impulsive people who are quick to anger may benefit from learning some mindfulness techniques. These can you help to see situations in a more neutral and objective light.

 

Forex trading is a steep learning curve, and it does take a lot of focus and discipline to be able to make money. However, most successful traders are just regular people who have put in some hard work and stick to a tried and tested trading strategy. 

 

There is no need to have a background in finance or a degree in economics to become a good trader. While it is important to learn as much as you can about forex and use your knowledge well, trading is also about emotional intelligence and self-control. 

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How To Trade Forex And Maintain Your Work-Life Balance

Forex trading is a demanding occupation, but it’s still possible (and also necessary) to maintain a good work-life balance whilst being a successful trader. In fact, the majority of forex traders do so on a part time basis and there are plenty of advantages to this approach. 

 

Good trading is not about slogging away 24/7, but about making the most efficient use of the time you have available, no matter how short that seems to be. The forex markets are highly liquid and trading in swift short bursts can be just as profitable as devoting 12 hours per day. Therefore it’s well worth cultivating a part-time trading career. Here are some tips.

 

Work out your priorities

If you are juggling trading, a relationship/family commitments, and a full or part time job, then you need to think about how much trading will impact on your personal life. The answer to this question depends on many variables and it will be different for everybody; it can be a question of the life stage you are at, and your personality and natural energy levels.  

 

When we have a lot on our plate it is important to draw boundaries between work and other aspects of life. However committed you are to forex trading, it is not worth sacrificing your relationship, friendships, health and hobbies for. What would be the point if you weren’t able to enjoy the fruits of your labour?

 

Work out where you can afford to make compromises and just how much of your free time you are willing to sacrifice. 

 

Choose your trading windows

There is no centralised global forex exchange, which means that the forex markets are active around the clock. This is a major advantage when you are fitting in trading around full time work, as it is still possible to find trading opportunities even outside of the core working hours of the day.

 

The major geographical trading centres are in London, New York, Tokyo, and Sydney. These cities all operate in different time zones and also have periods where their trading sessions overlap. These crossover hours tend to be the most active and therefore provide the best trading conditions. 

 

The London market trading session runs from 8am to 4pm; the Tokyo session runs from midnight to 9am, the Sydney session runs from midnight to 6am, and the New York session runs from midday to 9am (although check for daylight saving time changes). 

 

In the UK, part time traders can make use of the hours from 5pm to 9pm to trade on the New York market, which is ideal if your currency pair includes the US dollar (USD). This brings us neatly to the next topic…

 

Start with USD pairings

If you are new to forex trading and will just be trading a few hours per day, it’s strongly recommended to start with the USD as one of your currency pairs. This is because the USD is the world’s most widely traded currency, and there will always be buyers and sellers to be found whatever the market conditions are like.

 

The pair you are trading with may depend on when your trading window is. Choose from the other major currencies to begin with, so that you will give yourself the best chance of minimising losses and maximising your opportunities to take a profit. 

 

If you are going to be trading in the morning before work, the Japanese Yen (JPY) or the Australian dollar (AUD) are good options because you will be able to operate in the crossover windows. For evening trading, the Euro (EUR) or British Pound (GBP) are good choices. 

 

Use stop loss orders

Stop loss orders can be set to automatically sell a lot when a pre-specified price level is achieved. This prevents you from taking a disastrous loss if the market conditions should abruptly change while you are outside of working hours. 

 

Take longer positions

When you have limited time for trading, it can be tempting to rush the process, but this can lead to poorly thought-through decisions. Forex trading is never about chasing the money, but it is always about managing risk. This may not sound very exciting, but that is the reality of having any chance of becoming a successful trader. 

 

One of the most important qualities a forex trader needs to cultivate is patience. It is good practice to take long term positions that are for weeks or months, so that you can get comfortable with the idea of sitting back and trusting in your strategy, rather than meddling with your trades and damaging your prospects.

 

This does not mean that you will be doing nothing in the meantime; it is still important to keep up to date with the economic news and geopolitical events that will affect market conditions. It is an ideal time to learn how these events specifically impact the price of your currency pairs. 

 

Control your work environment

If you are going to be trading from home, it’s important to think about your office set up to make sure that you are working in the optimum conditions. If you are not able to have a spare room to use as an office, make sure that you work in a space that is free from distractions and has a good source of natural light.

 

It should be a space that you only associate with work, such as a zoned off area of the sitting room, rather than the armchair where you also put your feet up to watch TV, or even worse, your bed. This will help to put you in the right mindframe for working, and also help to preserve clear boundaries between your personal and professional life.

 

Avoid hunching over your laptop for hours on end, as this will eventually cause neck and back strain; conditions that can be very difficult to cure once they get a grip on you. Invest in a proper desk chair that supports your lower back, and ensure that your screen is adjusted so that the top is at eye level. 

 

Work on discipline 

The most successful traders are highly disciplined. Draw up a schedule and stick to it, rather than drift to and from your trading when the mood takes you. Trading is much more than a hobby, and you will need to show grit and determination rather than just dabble if you want to get results. 

 

You also need the discipline to develop a strategy and stick to it even when you are tempted not to. Be realistic and very clear about how much money you can afford to lose on each trade, so that you will never be exposing yourself to a catastrophic loss even in the worst case scenario. This is known as working out your risk tolerance. 

 

You don’t need a complex strategy as a beginner trader; it could be as simple as identifying your peak trading times and currency pairs, and using one or two technical analysis tools to work out your entry and exit points.

 

Over time, you should review your strategy to monitor how well it is working for you, and if there are any areas that can be refined or strengthened. It is very helpful to keep a trading journal to record your progress and to help you make effective reviews of your trading performance.

 

Cultivate your outside interests

Having outside interests is not just about living life to the fullest (although obviously this matters) but it also helps you to develop the necessary emotional detachment from your trading. If you devote almost all your time to trading or have no outside interests, it becomes bound up in your emotions and this is very bad news for a trader.

 

Trading decisions should always be objective and based on logical reasoning, which sounds obvious but in reality it is very difficult to achieve. This is because the threat of losing money or the reward of making it can trigger very powerful emotions such as fear and greed. 

 

Along the way, all manner of other inconvenient emotions can trip us up, including excitement, anxiety, hubris, anger, disappointment…you get the picture. Good traders learn how to recognise and control their emotional responses so that they do not interfere with their decision making. 

 

Having a well balanced life where you have other outlets for your emotions is one of the best ways you can maintain a good trading mindset. Working constantly is also detrimental to your physical health. 

 

Studies have shown that overwork can lead to chronic stress, which makes us more prone to all kinds of unwelcome conditions, including heart disease, high blood pressure, diabetes, and depression. Good mental health means that you will find managing anxiety during stressful trades easier and have better outcomes.  

 

Therefore maintaining a good work-life balance is not a matter of being self-indulgent or going easy on yourself. It’s about keeping your mind, body and soul in the best shape to deal with the rigours of trading. 

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HOW TO IDENTIFY YOUR STRENGTHS & WEAKNESSES

Newcomers to forex trading can often be a bit blasė about how much actually goes into becoming a successful trader, particularly here in the 21st century when we have so much technology at our disposal to help us get the job done.

 

It can be very easy to fall into the trap of thinking that all you need is a laptop, some innovative technological tools and resources, and away you go. Before you know it, untold wealth will be yours!

Well, not quite. 

 

While technology certainly is incredibly useful for forex trading and, of course, the advent of the internet made it entirely possible for anyone and everyone to try their hand at trading currency pairs, what’s essential to remember is that all of this actually comes secondary to who you are as a person, what your personality traits are, your individual strengths and weaknesses, how you react in certain situations… it can be quite the minefield!

 

Naturally, people are attracted to trading because it represents a particularly lucrative opportunity, but it can be helpful in the beginning to view it more as a journey of self-discovery, rather than a means of making cold hard cash.

 

If you don’t keep an open mind and if you’re not prepared to have some tough conversations with yourself about the changes you need to make internally, it’s more than likely that you’ll falter at the first hurdle and you’ll never fully realise your trading ambitions.

 

Identifying what your strengths and weaknesses are will be absolutely key if you’re to reach the stratospheric heights of trading success. This is what all the top traders will have done and will continue to do over time, learning more and more about themselves as they trade, an ongoing education that will only serve them in excellent stead on the trading floor.

 

What are strengths and weaknesses?

 

When you think about your particular strengths, consider which character traits or skills you might have that are considered positive. This could be anything from your unique set of talents to your general knowledge, emotional intelligence, skills, attributes and so on. 

 

Perhaps obviously, our strengths are what help us achieve our goals and ambitions, driving us on to attain and accomplish what we have in mind. Strengths can also help improve our life satisfaction and overall sense of wellbeing and happiness.

 

As for your weaknesses, these are those character traits or skills you have that may not be as well developed or which are perhaps having a negative impact on you and your life.

 

Becoming more self-aware in regard to both of these will be particularly beneficial for your trading performance, but it will require asking yourself some potentially difficult questions, questions that you may not like the answers to.

 

By developing a deeper understanding of your resourcefulness and your personal shortfalls, you’ll be able to put serious plans in place to help you attain your goals, as well as dealing with any potential challenges that come your way more successfully… which will make the path towards attainment even more enjoyable.

 

As long as you keep an open mind and have a readiness to change, however, you should soon start to see how this helps you as a trader… and once this realisation dawns, there really will be no stopping you!

 

How to identify your strengths and weaknesses

 

What can be helpful to remember is that people aren’t black and white. Typically, we’re varying shades of grey and judging your strengths and weaknesses along a scale rather than trying to pinpoint different traits and skills as being either entirely strong or entirely weak can be beneficial.

 

What’s more likely is that you’ll be stronger in some areas and weaker in others, which can help you work out which attributes to prioritise first. And don’t forget that we’re usually our harshest critics and you may well have to counteract the effects of being negatively biased towards yourself, so this is important to take into account as well.

 

Using self-evaluation tools can help get you off on the right foot. One particularly useful tool for traders is the Herrmann Brain Dominance Instrument, which can help you identify what your specific thought patterns and styles are, revealing how you would typically react to and address different situations and circumstances.

 

The results profile will categorise your thinking styles into four quadrants: analytical, experimental, relational and practical. The aim is to help further your understanding of how you’re likely to think in the face of new challenges and scenarios, showing you where you’re most likely to feel comfortable and where you’re likely to struggle.

 

Test yourself

 

Theory is all very well and good, and taking personality tests and aptitude tests can reveal all sorts of interesting traits and attributes that may well have been concealed up until now… but there’s nothing quite like putting yourself through your paces in real life to help you work out what you’re good at and where you’re lacking.

 

Challenging yourself can be hugely inspiring and one of the best ways to go about this is to try new activities and new pursuits. When you do something you’re new at and don’t have any experience in, it can be particularly illuminating and can really help you grow as a person, which is sure to translate into trading success at some point.

 

Whatever activities you decide to pursue, you’re sure to find that you’ll fail in some areas… and you might fail spectacularly! What’s important in this instance is to push past these initial feelings and persevere, or you’ll never gain the personal insights you’re looking for. 

 

Also bear in mind that you shouldn’t expect to gain these insights immediately and you may need to try, try and try again before you do take some lessons away – and, as such, it can be useful to debrief afterwards and properly process the experiences you’re engaging in to see what takeaways there are.

 

How to utilise your strengths and weaknesses to improve trading performance

 

A common belief is that by focusing solely on your weaknesses and working on your vulnerable areas, you’ll see improvements in your trading performance as a result. 

 

It’s important to remember that this won’t necessarily be the case and it’s essential that you don’t forget to focus on your areas of strength as well, maintaining a sense of balance between the two.

 

The key is to take full advantage of your personal talents, abilities and attributes to drive trading success, while working on your weaker areas so they in turn become strengths, as well. Weaknesses represent excellent learning opportunities and you would be wise not to shy away from addressing them if you do want to progress on your trading journey.

 

A good first step to take is to build your optimal trading strategy that takes your particular strengths into account. From there, you can start to think about how best to go about addressing your weak points and one really excellent way to do this is to keep a trading journal, recording all your transactions and executions over time.

 

This will give you all the data you need to see how well your strategy is working and the effect of any new implementations you bring in day by day. 

 

A journal can also help you keep your emotions in check and see if there are any scenarios or situations that could be triggering you into having a poor reaction, one that could cloud your judgement and lead your trades astray.

 

View every trading session as an opportunity to use your strengths and improve your weaknesses, practising consistently and tracking your progress as you go. 

 

Seeking out additional training opportunities, whether that’s by finding a mentor to help you or by educating yourself further on forex, can help you give those weaker areas more value, eventually turning them into strengths themselves.

 

By working in this way, you’ll develop a cohesive approach to trading that simultaneously allows you to look at the bigger picture while focusing on the smaller details necessary in order for you to hit your goals. You’ll also likely find that you start to trust yourself and your intuition a lot more, giving you a big boost in confidence as a trader.

 

All of this will give you the skills and expertise you need to help you hit your trading goals, as well as ensuring that you enjoy your choice of career far more, keeping you properly engaged and working productively as time goes on.

 

Given how volatile forex markets are, adopting a balanced approach to trading will help you on your path to success. So now’s the time to gain deeper insight into where your strengths and weaknesses truly lie.

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Inspirational Forex Quotes From The World’s Best Traders

There comes a point in every forex trading career, or even every trading week or day, when you need that little bit of extra inspiration. There is always someone who has been through your situation before and lived to tell the tale, and who better to turn to than some of the most successful and admired traders of all time? 

 

Here are some of the best quotes from some of the world’s most profitable traders to give you a motivational boost on a bad day!

 

Let’s start with the best before we get to the rest…Warren Buffett is the ultimate high net worth trader with a personal fortune of over $110bn, making him the fifth richest person in the world. He is CEO of Berkshire Hathaway, a leading US financial holding company, and he has a long history of making successful investments and business decisions.

 

Besides all this, he has philanthropic beliefs and has already donated billions of dollars to charities. In 2006, he stated his intention to give 83% of his fortune to the Bill & Melinda Gates Foundation. Seems like a guy worth listening to! Some people even call him the ‘Oracle of Omaha’ (Buffett was born in Omaha, Nebraska, in 1930). 

 

Without further ado, let’s examine his well informed, wise and witty advice. 

 

“The most important quality for an investor is temperament, not intellect.”

 

This quote should be inscribed above the door of every forex trader’s office, or at least written on a post-it note and permanently left stuck to their laptop. 

 

It is a pithy summary of what all books about forex trading psychology are trying to say: That most trading errors are not made through ignorance, but because the trader allowed their emotions to influence their decision making process. 

 

New traders may feel dismissive of talk about psychology and emotions: after all, most of us like to think of ourselves as rational human beings who are capable of thinking objectively, especially when it comes to our professional lives and career. 

 

The problem is that trading is very difficult to separate from the aspects of life that concern us most deeply: when we place a trade, we are taking a controlled risk with our financial security and this affects our very basic needs for survival, such as food, shelter, and warmth. 

 

When these needs are under threat, primal human emotions come into play, including fear, greed, anxiety, and impatience. No one is immune to these feelings and they can subconsciously influence our decision making, usually for the worse.  

 

Fear can lead us to close a trade before the target price is achieved, greed can lead us to trade even when there are no good opportunities or reasons to do so, and anger or anxiety can lead us to ‘revenge trade’ to try and compensate for a previous loss. 

 

The wise trader is someone who is constantly checking in on their emotional state and imposing a system of checks and balances before every move. They have patience and discipline, and as Buffett states, this is more valuable than technical ability. As he also says: “The market is a device for transferring money from the impatient to the patient.” 

 

Let us graze further from the Buffett banquet table: “Risk Comes From Not Knowing What You’re Doing”. 

 

This quote might appear to contradict the first one, but it doesn’t mean that you need to know or understand everything about forex; it means that you need to research those areas that affect the currency pairs and trading strategies that you are working with. Forex trading is all about minimising risk, and knowledge helps you to do this. 

 

Keep up to date with the economic news, and with geopolitical events that affect the market price of your currency pairs. Review your trading journal on a regular basis to identify what is working best about your trading strategy and what might need adjustment. Master some technical analysis tools and find out which ones work best for you.

 

Learning about forex is a constant process and you need to stay ahead of the game. Even when you have had a run of successful trades, it can be very dangerous to sit back and assume you have hit on a winning formula. There is really no such thing in forex trading, so never be lulled into a false sense of security or you will soon be taking unmanaged risks. 

 

One final quote from the Buffinator before we move on: “Never depend on a single income. Make an investment to create a second source.”

 

There are two strands of wisdom forex traders can take from the above quote. The first is especially important for newcomers who are considering trying to make a living from forex trading. If you have quit your job in the hope of being your own boss and free from the pain of the 9-5, then you have almost certainly put too much pressure on yourself.

 

Inexperienced traders should use a demo account for at least two or three months before they start trading live, to get acquainted with the trading platform and to test drive their trading strategy. Even then, it is likely to be at least 12 months before you start making a steady profit as a forex trader.

 

Therefore, it is highly recommended that you have a second income stream to cover your basic living expenses while you gain confidence in your trading ability. It can be a rollercoaster ride, and it will be much easier if you are not also trying to make a living from trading. 

 

Many people fit trading in around a part time or even a full time job. The forex markets are highly liquid and operate almost 24/7. The peak trading hours between London and New York occur before 9:00 GMT and after 16:00 hours, so it is relatively easy to trade before or after your normal working day. 

 

Having a second income to support you will also help you maintain good mental health and stop you from being pushed into emotion-led trading decisions based on fear, anxiety, or greed, as we have already discussed. 

 

The second point to take from Buffett’s quote is more pertinent to forex traders who have some experience under their belt and are making steady profits. It’s about getting the best value from your hard won money, and choosing to invest it wisely so that it can earn you a second passive income. 

 

This means that you will eventually reap twice as much reward from your efforts, and in the long run this will benefit you more than a load of designer clothes or a succession of overseas holidays. 

 

Let’s move on to more words from the wise. Alexander Elder was born in Russia and trained as a psychiatrist. He moved to New York where he worked in medical practice before moving on to become a successful financial trader. As you might have already guessed, his background in psychology provided him with insight into the financial world. 

 

Here is one of his most famous quotes: “The goal of a successful trader is to make the best trades. Money is secondary.” 

 

This is a really important point for new traders to understand, especially if you have set high profit goals for yourself. Good traders have mental and emotional discipline, a thirst for knowledge, and are highly focused. Developing these traits will help you to make the best trading decisions, and in time steady profits will follow. 

 

If you are simply in it for the money, you will soon lose the willpower and motivation to carry on. The key is to enjoy the journey, rather than fret about the final destination.

 

One final quote from Elder to finish on: “You have to identify your weaknesses and work to change. Keep a trading diary – write down your reasons for entering and exiting every trade. Look for repetitive patterns of success and failure.”

 

We’ve said it before and no doubt we’ll say it many times over again: Keep a trading journal. If it worked for Alexander Elder, then it can work for you too. Your journal should be more than just a record of which trades you made and when. It should be an integral part of your planning process, so that you can review your past performance at a glance. 

 

Note down key performance indicators such as total profit or loss, monthly average return percentage, and eventually your annualised return and net gain, together with your overall success rate. It is also helpful to keep a watchlist of potential trading opportunities that are most likely to suit your trading strategy.

 

As well as these factual details, try adding a retrospective summary of each trade, and reflect on what you think you did well and what you need to improve. This can help you identify unhelpful patterns of behaviour, because we all have a natural tendency to repeat mistakes. 

 

Of course you can also look at your most successful trades to see if you can identify a pattern. Over time, your journal will become an essential part of your trading toolkit. 

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Why Forex Trading Can Teach You Valuable Life Lessons

On the face of it, forex trading may seem to be all about crunching numbers and analysing charts to try and make a profit. People are drawn to it because they want to have an extra income source, and there is nothing wrong with that at all. Who doesn’t enjoy having spare cash for nice clothes or holidays, or to build up a nest egg for the future?

 

However, most traders soon discover that if they are to realise their dream of becoming a profitable trader there is a lot to learn, and not all of it is about facts and figures. Pursuing success in forex trading can teach you wider lessons about life, which can often prove to be just as valuable. Here’s a look at just a few of them.

 

It teaches you about managed risks

Even before you start live trading, you should already know that forex trading is not about taking risks, but about managing risk. If you enjoy the thrill of uncontrolled risk taking you may as well spend your time and money on gambling. 

 

It is essential that you understand the concept of risk in forex, because with high leverage available, the consequences of an irrational decision can be severe. While high leverage means that the potential rewards are greater, so is the potential risk of incurring losses. In the heat of the moment, we are all human and subject to the temptation of greed.

 

However, this is a slippery slope that professional forex traders won’t go within a mile of. They never, ever take a gamble in the hope that the dice will fall in their favour, no matter what their instincts are urging them to do. No one is born with a natural ‘gut instinct’ for a good trade, because there is really no such thing.

 

Experienced traders only ever act on cold logic. This means that they work out the probability of their trade being successful on the basis of fundamental and technical analysis. They spend time understanding which factors influence the movements of the markets and the price of the currency pairs that they trade to identify a suitable entry or exit point.

 

Before entering a trade, they will have drawn a line that they will not cross, based on how much money they can afford to lose, and are comfortable with losing. This amount will never compromise their ability to pay for life’s essentials. 

 

Furthermore, they will measure the risk they are about to take by studying price charts or by using another form of technical analysis. That measured risk will then be further managed by using a stop loss that will automatically trigger an exit once a predetermined price is reached. In other words, every single step of the way is managed to minimise risk.

 

There are countless ways that the ability to assess and manage risk can help you in your wider life and career. Knowledge is power as they say, and once you are a seasoned forex trader you will always look before you leap wherever you are and whatever you are doing. 

 

It teaches you self-discipline

As we have seen, successful forex trading is all about keeping ahead of the game, learning about economic events, mastering technical tools, and sticking to your strategy even in the face of temptation. All this takes hard work and self-discipline, which is a very useful quality to develop and something that anyone can learn.

 

The ability to stick to a routine, keep an eye on detail, plan ahead and not give up when faced with setbacks will help you succeed in any professional job role and achieve your goals. It is also useful for making those big life transitions go well for you, such as buying your first house, changing jobs, or even just booking a holiday. 

 

Even when it comes to our personal lifestyle, self-discipline can help us stick to an exercise regime, a healthy eating plan, or to master a new hobby or skill. This in turn can boost our mental and physical health, leading to better performance at work, more confidence, more energy—you get the picture! It’s a virtuous circle. 

 

It teaches you emotional maturity

We all have emotions that influence our decision making in life, whether we are conscious of them or not. Sometimes this may be inconsequential, but in forex trading it never is. When we place a trade, we are not just putting our money on the line. Our personal wealth is tied up with our status, ego, and our ability to afford our basic needs in life. 

 

Therefore even the most even tempered individual can be prone to powerful emotions such as greed or fear when they are trading. This can lead to decisions that are made under pressure on the spur of the moment, as that basic survival instinct kicks in and the adrenaline is surging around the body.

 

Professional traders learn how to step aside from any emotions they are experiencing, no matter what is facing them. Panic, excitement, fear or over confidence have no place in forex trading because they encourage you to take unmeasured risks, which as we have seen is not what trading is all about. 

 

Learning to recognise strong emotion and taking a step back from it is a valuable skill in all walks of life. It can help you develop better personal and professional relationships, and make more balanced decisions in your career or other areas.

 

We can probably all think of a life situation where being overconfident led to a careless mistake, or caused someone we care about to think badly of us. You can probably also think of a time when being too cautious or afraid led you to miss out on doing something you enjoyed. Learning how to manage these emotions can help you get the best out of your life. 

 

It reveals your personal strengths and weaknesses

Related to emotional awareness is self-knowledge. None of us is perfect, and we all have different strengths and weaknesses. In forex trading, your personality type can matter just as much as your technical knowledge. 

 

For example, if you know that you are naturally cautious and hate making decisions under pressure, then long term trading is likely to bring you the most success. On the other hand if you are naturally impatient and quick thinking, then you are likely to thrive when making short term day trades. 

 

Although good emotional management is necessary for forex traders, there is no point fighting against your nature. Admitting your personal strengths and weaknesses can actually be a superpower in all aspects of life, because it naturally helps you to work towards careers and interests that you enjoy, rather than trying to live up to expectations set by others. 

 

It teaches you how to handle failure

All forex traders fail. In fact, to be a profitable trader you only need to be successful in around 50% of your trades, and so you need to learn how to handle losses without becoming too overwhelmed or disheartened. No one likes to admit they are wrong, but sometimes it’s better to cut your losses and learn the lesson.

 

By looking over your trading journal and analysing the reasons why your trade might not have worked out, you can use your failures as an opportunity to learn and make improvements. This not only helps you be a better trader, but also develops mental resilience that is useful in all walks of life. 

 

It teaches you to be comfortable out of your comfort zone

Forex trading is a game of uncertainty, and always operating within your comfort zone will seriously affect your progress. To make gains, you need to push yourself and always be alert to changes in the market conditions. 

 

This isn’t to say that you should abandon your trading strategy and take uncontrolled risks, but that you should be proactive and dynamic in your approach to trading. This will mean that you are always well placed to identify good trading opportunities, rather than always sticking to a formula when the market conditions have changed. 

 

Stepping out of your comfort zone can also help you live a richer and more rewarding life, no matter what your goals are. Want to travel the world, get back into the dating game or take part in your first triathlon? Use those forex trading superpowers and you will soon be on your way to success!

 

It teaches you about wider geopolitical issues

To make the best trading decisions, it is important to keep up with geopolitical events that can influence currency prices, such as elections, conflict zones, and natural disasters. This can lead to a deeper understanding of how political and financial leaders shape our society and economy, and how they personally affect your life.

 

In conclusion, even if it wasn’t your intention, your journey to becoming a forex trader can also lead you to becoming a better informed and well rounded individual. It’s a win-win situation.

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8 Key Forex Trading Terms To Familiarise Yourself With

There are lots of ways to learn about forex trading, from online learning courses to podcasts. However, sometimes you can’t beat the power of a good old fashioned book. Reading can enable us to get to grips with some of the more complex elements of trading at our own pace, allowing us to drill down into the details until everything really makes sense. 

 

The more widely you read about forex trading, the more confident and knowledgeable you will feel when you begin to make live trades. Some of the best traders developed their ‘edge’ by having useful pockets of information stored away that they could draw on at crucial moments.

 

From refining your strategy to learning more about the history and psychology of forex trading, there’s a wealth of material to draw on. Furthermore, you will be able to understand how all these different elements intersect with each other and this will help you to become a well-rounded and well informed trader. Here are some suggestions for your forex library. 

 

Forex for Ambitious Beginners: A guide To Successful Currency Trading by Jelle Peters

This book is excellent for those just starting out on their forex journey who are impatient for success. It does not make unrealistic promises about how you can become a profitable trader within a few months, or try to sell the idea that forex is a quick and easy way to make a buck. 

 

Instead, it is honest and upfront about the pitfalls that can await the unwary trader, and shows you how best to avoid them. It covers all the basic background information such as which factors influence the value of different currencies, how to determine your risk tolerance, and how to create your own trading strategy. 

 

The book also covers the basics of technical analysis and explains how to read line charts and candlestick charts. It reinforces the fundamental concept that successful forex trading is all about carefully managed risk and spotting opportunities to maximise potential profits. 

 

Forex Trading: The Basics Explained in Simple Terms by Jim Brown

This is one of those books that basically does what it says on the tin. It is an ideal starting place for newbies who are feeling just a little bit overwhelmed by the whole prospect. It is written in clear language but doesn’t talk down to the reader or assume any prior knowledge of the forex markets.

 

It starts off with a bite sized definition of what the forex markets are and what the purpose of forex trading is. It then covers the basics of forex pairs and how to develop entry and exit strategies. Brown introduces the concepts of trading psychology and offers tips for how to choose the right broker.

 

Brown also discusses his own trading strategies that the reader can use for guidance or inspiration. 

 

Trading in the Zone: Master the Market with Confidence, Discipline, and a Winning Attitude by Mark Douglas

This book emphasises the importance of the trader’s state of mind when making decisions and tackles the common thought biases that can sabotage good practice. 

 

It focuses on the game of probabilities that is involved in any act of trading, and spells out that the trader’s goal should always be to aim for consistent profits over time, rather than to become emotionally involved with the outcome of every single trade. 

 

The book’s central thesis is that no matter how much technical or fundamental analysis has been carried out on the movements of the market, it is impossible to predict the outcome of a trade. Therefore what matters for making a profit in forex trading is developing a strategy with an edge that will lead to a higher probability of success over a series of trades.

 

As you might have realised, this is not the book for people who want to delve deep into the technical elements of forex trading. It’s very much about developing the right trading mindset, which can be just as important to success as more concrete skills such as knowing how to use Bollinger bands.

 

A Complete Guide to Technical Trading Tactics: How to Profit Using Pivot Points, Candlesticks & Other Indicators, by John L. Person

It’s good to balance out the abstract theory of forex with up to date technical tactics. This guide is written by a professional forex trader who explains how to use some popular technical tools such as candlestick charts. It provides plenty of examples with diagrams and charts so that the reader has a clear practical introduction to the topics.

 

The author shares his own experiences of using the various methodologies and introduces the reader to the futures and options market as well. It’s a good read for those who want to approach technical analysis tools with more confidence and discernment. 

 

It will allow you to work out which ones work best for you, and which ones you might want to refer to in the future. By broadening your knowledge of technical trading tactics, you can become a more competitive trader.

 

 Day Trading and Swing Trading Currency Market: Technical and Fundamental Strategies to Profit from Market Moves by Kathy Lien

This is a useful book for new traders who want to focus on making short term trades. This strategy often works well for those who are fitting trading in around a full time job or other commitment, because it allows you to dip in and out of trading at different times of the day. 

 

Kathy Lien is a respected figure in the financial industry. She is a leading currency analyst and often makes guest appearances on financial news programmes. This is the third edition of her popular book that combines the theories of both technical and fundamental analysis to introduce readers to day trading and swing trading strategies.

 

Lien discusses the factors both long and short term that affect the value and movement of currency pairs and the technical trading strategies used by professional traders. Throughout the book, she demonstrates how to put theory into practice in a clear and concise manner.

 

Currency Trading for Dummies by Brian Dolan and Kathleen Brooks

The For Dummies series are a bit like Marmite: you either love them or loathe them. Whatever your view, there’s no doubt that the formula of concise and to the point prose with plenty of recaps and examples works well for many people. 

 

The user-friendly approach will be appreciated by many new forex traders who want a clear and comprehensive overview of the forex markets. It discusses the major factors that drive the forex markets, different trading strategies and styles, and the importance of researching and devising your own strategy before you begin trading.

 

It also offers advice on risk management and discusses some of the most common pitfalls that can catch out new traders. The authors also take a look at the factors that they consider to be the most important traits of successful traders. This book is useful for beginners, and for those who want a refresher course in forex.

 

Market Wizards: Interviews with Top Traders by Jack D. Schwager

This book is a classic bestseller and is a fascinating insight into the personal stories behind the world’s most successful traders. The inspiring interviews with famous traders include Bruce Kovner, Richard Dennis, Paul Tudor Jones, Michel Steinhardt, Ed Seykota, Marty Schwartz, and Tom Baldwin.

 

The book dispels the myth once and for all that forex trading is an easy way to make money, or that it boils down to luck. The common thread to emerge from the interviews is a picture of solid trading strategies combined with mental and emotional discipline. 

 

The author provides a series of takeaways for the reader that they can use to shape their own approach to trading.

 

America’s Bank by Roger Lowenstein

This book focuses on a key episode of history that led to the shaping of the world’s largest economy. You will not learn about any techniques and strategies that you can specifically apply to forex trading, but it is worthwhile devoting some time to understanding the background forces that built the current forex markets. 

 

The events in America’s Bank relate to the aftermath of the financial crash of 1907, which wiped 50% of the value off the New York Stock Exchange. Prior to this crisis, many influential figures in American society were against the idea of a central bank.

 

 However, the financial landscape was to be permanently changed by the event, and the author tells the dramatic story of how the Federal Reserve was created. Before the forming of a Central Bank, the American banking system was provincial and disorganised, and resistance to reform was strong. 

 

Roger Lowensstein is a skilled financial journalist and weaves together a gripping narrative featuring the four men who were key to the founding of the Federal Reserve. It’s a fascinating tale of politics and power struggles that will seem all too familiar to modern day readers. 

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