Category: General

How Long Does It Really Take To Be A Profitable Forex Trader?

If you are considering embarking on a forex trading career, at some point you are inevitably going to wonder just how long it will take to start generating steady profits. You naturally want to know when you will be able to reap the rewards of all your hard work and commitment, and it’s a perfectly valid question to ask.

 

It’s important to have realistic expectations from the outset, so that you can set yourself clear goals and avoid becoming too disheartened along the way. Anyone who thinks that forex trading is a good ‘get rich quick’ scheme will sadly soon find that they are mistaken. 

 

OK, so fluke trades or beginner’s luck might land you a decent profit once or twice early on in your career, but few inexperienced traders will be able to sustain this for any length of time. However, assuming that it takes years and years to turn a steady profit from your trades is also a rather dispiriting prospect. So how long will it really take to get good results?

 

This might seem to be a rather frustrating and evasive answer, but the truth is: it depends. Here are some of the main factors that will influence how quickly you can expect to become a successful forex trader. 

 

How much time you have to devote to trading

The first and perhaps most obvious point is to consider how much time you have to spend on your forex trading career. If you are lucky enough to be able to devote the majority of each day to learning the ropes of forex, you are going to be in a position to start making live trades much sooner than someone who is a weekend or evening trader. 

 

That said, some people are incredibly focussed and fast learners, while others are slow but steady in their progress. It is not just a question of how much time you have to give, but also how well you spend that time. You might be familiar with the saying that ‘work expands to fill the time available.’

 

It was first coined by Cyril Northcote Parkinson in 1955, and it succinctly describes the phenomenon that most of us will have noticed in our own behaviour at some point in our lives.

 

 For example, when you were at school or college and you had a whole weekend to finish an essay, you may have become sidetracked with irrelevant details, or just worked in a more leisurely and meandering way because you knew that you had two days to complete the work.

 

However, if the deadline was at 9am the following morning and it was 5pm on the night before, you probably knuckled down and nailed the key arguments of the essay much more quickly. There is even a chance that your work was punchier and more to the point as a result. 

 

The same theory can be applied to learning forex. There is no denying that it is a huge and complex topic, and even successful and experienced traders accept that they will never know everything about it. As a newcomer, it can be easy to become bogged down with learning reams of theory and technical detail.

 

While it is important to read widely and learn about the nuts and bolts of forex trading before you begin, this can expand to become a never-ending process if you let it. The best approach is to focus on which information will be most relevant to your trading strategy, and save some of the more advanced techniques for another time.

 

Your current level of knowledge and experience

Some people move into forex trading because they already have some knowledge and experience of dabbling with stocks and shares, or have even had a career in finance and are looking for a new challenge. On the other hand, anyone with a laptop and internet connection can become a forex trader if they have enough commitment.

 

However, those who are already used to the world of financial trading will have plenty of transferable skills under their belt that will give them a competitive edge. These include risk management techniques, technical analysis skills, and an awareness of how wider socio economic and geopolitical events can influence the financial markets. 

 

If you are already familiar with these concepts, then you will be well prepared to embark on a forex trading career after a relatively short research and training period. However, it’s still strongly recommended that you trade with a demo account for at least one to three months before making live trades.

 

A demo account allows you to test drive your trading strategy to highlight any weaknesses and correct mistakes without risking any damaging losses. Even successful traders use them when embarking on a new platform or strategy. 

 

If nothing else, it will ensure you are familiar with the layout of the user interface and help avoid delays when you need to find a particular feature or page in a hurry.

 

If you are a complete newbie, there is no question of skipping the demo account stage! Spending at least three months learning the ropes with a demo account is advisable if you are learning forex trading from scratch. 

 

Your natural temperament and ability

We are all individual in our talents and personalities, and this is not something you can leave at the door when you are forex trading. Some people have a good head for facts and figures and a quick and agile mind. If this is you, then you are in a fortunate position and will probably have a natural aptitude for trading.

 

However, raw ability is certainly not everything when it comes to a successful forex trading career. It also takes commitment, discipline, self-awareness and emotional maturity, and these skills can be learned and strengthened over time. 

 

Far from the image of the cut and thrust financial world that you might have gleaned from films and books, the key to making steady profits in forex trading is good risk management and the willpower to hold fast and stick to a tried and tested strategy. 

 

When faced with the prospect of losing money or making a profit, we are all subject to powerful emotions such as fear and greed that can influence our actions. Unfortunately, in forex trading, making decisions based on emotions will soon lead you on a downward spiral of failure. 

 

Successful traders often go through a period of failure first, and this might even be a necessary part of the learning process. The difference between them and the also-rans is that they didn’t give up or become angry and frustrated. Instead, they patiently went back over their trading journal to identify where they were going wrong, and made some changes.

 

This ability to remain stoical and logical no matter what is thrown your way is arguably just as important as a natural facility with charts and numbers. The most difficult part can be learning to recognise the signs that your trading is motivated by a negative emotion, rather than because you have genuinely identified a good opportunity in the markets. 

 

The best traders usually enjoy the whole process of constant learning and analysing for its own sake, rather than because they are driven purely to make money. Profits in forex trading are the side product of a solid trading strategy and a good approach to risk management. 

 

Of course, all this takes some time to achieve. The question of how long will depend on how committed you are to developing your strategy and your level of psychological resilience in the face of moments of anxiety, fear, anger, and so on. It might sound counterintuitive, but patient traders with good impulse control often succeed the soonest. 

 

How much capital you have to invest

One final point about how profitable a trader you will become is related to the amount of capital you have at your disposal. There are plenty of good trading platforms with instant forex funding available that offer high leverage. The amount that you can invest and are willing to risk in each trade will obviously influence your profits margins.

 

Trading higher amounts will give you a better return even if you make small profits, whereas you can be making impressive percentage returns but if you are trading with relatively small amounts of capital, it will take longer to build up a good income. 

 

Starting small is a good policy for new traders to limit potential losses. Once you become more confident and knowledgeable, you can invest more within the margins of your risk tolerance. 

 

Conclusion

So after all this, you probably still want an estimated timeframe to work with. Those traders who are the most committed and use their available time well can expect to see steady profits within six to 12 months. For those learning forex from scratch around a full-time job, a longer time frame of anything between one to five years is more realistic.

 

Remember that even experienced traders still have failures, and forex is a constant learning curve that should be enjoyed for its own sake, as well as a source of extra income.

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6 Lifestyle Secrets Of Successful Forex Traders

There is a wealth of information out there about the technical analysis skills that you need in order to be a successful forex trader, and of course these are very important. However, a good trader possesses more qualities that gives them a competitive edge over others.

 

These often boil down to the right mental attitude and daily habits, which might seem trivial or abstract, but are in fact key ingredients to their success. Here are some of the best kept lifestyle secrets of the top performing forex traders.

 

They are eternal students 

A successful forex trader knows that they don’t and can’t possibly know everything. However, they are not daunted by this prospect. In fact, accepting that you don’t know everything can save you from becoming overconfident, and making poor decisions on the spur of the moment. 

 

Good traders know that there is really no such thing as a ‘magic touch’, or a genius who knows everything about the forex market. What they do understand is the importance of learning in depth about the aspects of forex trading that are most relevant to their personal trading strategy. 

 

Besides an in-depth understanding of technical trading methods, forex traders also need to have a good grasp of the wider economic factors that influence the forex markets. A successful trader will be well read on the history of the foreign exchange market, and why it is so sensitive to the ebb and flow of supply and demand. 

 

They will keep up to date and well informed about the latest financial news by following an economic calendar to ensure that they never miss key data releases. These can include factors such as interest rate changes, unemployment figures, inflation rates, GDP, and commodity prices.

 

There are a wealth of forex learning materials available, from online tutorials and seminars, to podcasts, books, and journals. Experienced traders read widely and will also follow current affairs closely.

 

This is because geopolitical events such as elections, natural disasters, national and international conflicts, and pandemics can have a direct influence on the movement of the forex market. 

 

In summary, successful forex traders know that learning is a constant and lifelong process. They are also selective in which areas of knowledge they want to learn more in depth about, so that they are acquiring the information that is most beneficial and relevant to their trading strategy. 

 

They will also keep a sharp eye on wider current affairs that can have an impact on the markets. By being well informed but not bogged down in a lot of superfluous detail, a forex trader will be in a stronger position to spot opportunities to make a good trade at the right moment. 

 

They are not motivated by money

Strange as it may sound, the best forex traders are not motivated by money. They understand that steady profits are the by-product of a good trading strategy, rather than an end goal in itself. If you are trading because you need the money to pay the bills, you are putting yourself under too much pressure and are likely to make mistakes. 

 

Of course, it is possible to make a living out of forex trading, but this is a long term goal that will be achieved when the right level of skill and experience has been built up. It is a much better strategy to only trade with what you can afford to lose, and never risk the money that you need to cover your essential expenses.

 

Good forex traders are also in the game because they enjoy the whole process of learning and the challenge of agile thinking and forward planning. If you view it solely as a means to an end, you are unlikely to thrive and become really successful. 

 

They have a daily routine

The importance of following a structured daily routine cannot be overstated. No matter how good your knowledge and technical skills are, if you don’t have the discipline to apply them to your trading in a consistent manner you will never be as successful as you could be. 

 

It goes without saying that the trader will already have a solid strategy in place before embarking on live trading. The next step is to make a checklist of each daily task that makes up this goal. By writing down each step, you will be able to focus on small details, keep accurate records of your trading, and see new opportunities more clearly.

 

Many forex traders fit their trading in around a full or part time job, plus other demands of raising a family and running a household. Even the most focused of individuals can find that this affects their concentration, and distractions and interruptions can be difficult to avoid if you are working from home. 

 

A routine that is set out in writing is a great tool for impatient personalities in particular, because it can help you avoid the temptation to rush and cut corners. Forex trading requires patience and attention to detail, so by following a checklist you can be sure that you are not overlooking anything that could lead to a costly mistake. 

 

They are emotionally intelligent

Understanding the psychological factors that influence our behaviour is fundamental to developing good trading skills. Trading brings out strong emotional responses in a person, including fear of losing and greed for bigger profits. 

 

Even the most well-balanced individuals are not exempt from this, and in fact assuming that you are too strong to fall prey to your emotions can be a dangerous strategy. We are all motivated by our instincts to a certain extent, because of thousands of years of conditioning. 

 

The key is to recognise when you might be tempted to make a decision based on your emotions rather than a detached analysis of the situation. All your trading decisions should be made in accordance with your trading strategy and your risk tolerance. 

 

In most situations, it’s best to take your money when you hit your profit target and likewise cut your losses when they hit your predetermined number. 

They know when not to trade

A common mistake that inexperienced traders make is assuming that the more trades they make, the better the chance of success. However, trading for the sake of it rarely pays off in the long run. Having the discipline to make a few well researched trades rather than a lot of guesstimates is one of the best routes to steady profits.

 

Sometimes, the fear of missing out (FOMO) can drive a trade, rather than a logical and objective strategy. Never trade to try and make up for a previous loss, as your desire to rectify your mistakes will only cloud your judgement further. If your pride has been wounded with a painful losing streak, take a step back and pause your next trade.

 

 Look objectively for the causes of your bad run. See if you can identify a pattern in your recent trades that might be responsible for the poor outcomes, and if so, adjust your trading strategy accordingly. 

 

They take care of their own wellbeing

Most successful traders also know the importance of maintaining a life outside of the intense world of forex trading. Those who treat trading as an all consuming obsession will inevitably burn out, or be forced out by a series of poor decisions made under pressure. 

 

It’s essential to schedule in recreational time away from trading and your other jobs. This helps you to clear your mind, so that you can bring a new approach and refreshed energy to your trading. 

 

Some of the most influential people in the world practise a daily meditation routine to help them mentally focus and to break through any negative bias in their thought patterns. Even the most upbeat and optimistic of personalities can be prone to negative thinking, because this is what the human mind has naturally evolved to do.

 

We need to be on our guard against danger and potential pitfalls in life of course, and this is why our minds tend to amplify problems and doubts, rather than let us enjoy our successes and dwell on happy memories. 

 

However, with practice, we can train ourselves to recognize negativity bias in our thinking, and learn to see situations in a clear and more neutral light. It is easy to see the link between this mindset and the benefits for making sound trading decisions. When we are not influenced by emotions, the more logical and effective our actions tend to be.

 

There are no right or wrong ways to meditate. Many people start by sitting quietly in a place free from distractions for 10 or 15 minutes. They try to focus on the present moment, and gently bring themselves back if their mind starts to wander. 

 

It takes some patience to master the technique, but gradually the benefits will reveal themselves.

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The Perfect Home Trading Setup: Our Top Tips

No doubt one of the most appealing aspects of pursuing a career as a forex trader is the fact that it can be done anywhere, at any time. All you really need is a laptop and an internet connection and away you go!

 

However, if you do really want to reach the dizzying heights of true success on the forex markets, paying close attention to your setup is definitely a wise idea, as your choice of working environment can make or break you where productivity is concerned. 

 

In fact, if you’ve been plateauing a bit of late, you may want to cast a critical eye around your surroundings to see if they could be having an impact on your mood and general outlook, something that we all know can have a significant knock-on effect where trading success is concerned.

 

Assuming that you do most of your work from home, it makes sense to design an at-home office that promotes productivity and clear-headed thinking so that you can help ensure strong decision-making, no matter what happens day in, day out.

 

To get it right, you’ll need to know who you are as a person and what sort of environments you like to work in. Do you, for example, thrive and perform at your best in total silence? If so, you might want to prioritise soundproofing of your space to ensure that there are no distractions from outside or elsewhere in the house.

 

Alternatively, if you know you need some background noise going on, installing a top-notch sound system that allows you to play your favourite music or stick on some white noise could help you concentrate and see the results you’re looking for far quicker. 

 

Other people, meanwhile, do well when there’s digital wallpaper playing in the background, so if this sounds like you, making sure that there’s a TV or some other kind of screen setup in place could help you perform better on the trading floor.

 

These are some of the more obvious suggestions, of course, but if you’re looking to go a bit deeper with your home office interior design ideas, here are just a few top tips from us to help you ensure you get it right from the outset. Which of these will you try first?

 

Lighting

 

One of the most important aspects of any interior design scheme is your lighting system and it’s something that you should factor in at the very beginning of your plans. Leaving it till last or as an afterthought inevitably means that it may well miss the mark and you might find it hard to see what you’re doing… and this can really have an impact on your performance.

 

If the lighting in your home office is poor, you run the risk of headaches and eye strain, neck, back and muscle strain, a dip in productivity, an increased risk of slips, trips and falls, and it can even have an impact on your mental health if you’re not careful.

 

A recent study by City University London found that while lighting on its own is unlikely to have a big impact on performance, it’s one of several factors that come together to create a healthy work environment, which can promote engagement, wellbeing and productivity. 

 

What’s more, even the colour of light you decide to go for can have an impact on your mood and work performance, so it’s certainly worth taking the time to experiment with different options to see what effect they can have.

A truth universally accepted, however, is that natural light is one of the best sources of light you can go for, having positive effects on your wellbeing… so putting your desk near a window could make a big difference to how well you trade over time.

 

Once you’ve worked out how to maximise the amount of daylight you can flood your space with, you’ll then need to think about general and task lighting. Think about what time of day you prefer to trade in, as this will affect what lighting would be most appropriate. If you’re a night-time trader, for example, you’ll need high-quality task lighting to help keep you alert.

 

Ergonomics

 

Spending long working hours sat at a desk in front of a computer screen can really take its toll on you physically, mentally and emotionally, so it’s essential that you factor ergonomics into your home office design scheme.

 

You might not think it but sitting incorrectly and not having the right setup can actually put you at risk of developing all sorts of musculoskeletal disorders, everything from chronic low back pain to repetitive strain injury and carpal tunnel syndrome, to name just three. 

 

Conditions like these can take a long time to resolve themselves, so it makes sense to focus on prevention rather than cure if you can.

 

There are lots of little ergonomic tricks of the trade you can employ that will help you keep chronic pain at bay, however, such as by making sure that the top of your computer screen is at or just below eye level so you don’t risk putting your neck in stressful positions.

 

When seated (on a comfortable chair that offers you proper lower back support), make sure that your elbows are close to your body and properly supported, with your wrists and hands in line with your forearms.

 

In terms of chair height, you need to make sure that you are able to keep your feet flat on the floor at all times, so make the necessary adjustments to help you achieve this.

 

Another option, of course, is a standing desk if you really don’t want to be sitting down for hours at a time. It seems that there are actually all sorts of health benefits associated with these desk options, everything from reducing your risk of weight gain to potentially reducing blood sugar levels, reduced risk of heart disease and a reduction in back pain.

 

Interior niceties

 

Injecting some of your personality into your at-home office is easily achievable, since you don’t have any managers to pander to and don’t have to worry about work-related branding. The design world is your oyster, so to speak!

 

Even if you’re not particularly confident in your design skills, you can easily put together a lovely scheme that helps you enjoy your working environment and gives your productivity a serious boost. 

 

And, failing that, you could always consider bringing in some professional help to ensure that you create a beautiful room that speaks to who you are while ensuring that you’re able to get the trading job done successfully.

 

Before you make any shopping decisions, however, it’s important to take the time to think about what you actually need in order to work effectively. If storage is an essential, for example, make sure that your choice of desk has lots of drawers, or that you’ve picked a part of the house that allows you to install tall shelving units.

 

Also consider how you can create a happy and healthy workspace through interior design choices. It’s long been known that proximity to nature has a big impact on our overall mood and this is something you can easily tap into for your home office. 

 

The good news is that it isn’t at all difficult to bring nature into the house… all you need is some plants here and there, an incredibly easy and quick decorating win.

 

Low-maintenance plants are perhaps a good idea, especially if you’re new to the wonderful world of growing, so you don’t have to worry that you won’t have the time to look after them. 

 

Picking plants that can look after themselves is a good place to begin – although you may well surprise yourself and find that you actually enjoy looking after the greenery, taking full advantage of the meditative effects of the practice.

 

But what plants to choose? Peace lilies are a great option for first-time plant owners as they don’t need lots of light and can come back relatively successfully if you accidentally overwater them. 

 

It’s also thought that they can help filter and purify the air (so great for your office and your health)… and they look beautiful to boot, with their stunning broad deep green leaves.

 

Something else that’s very easy to go and very attractive into the bargain is the dracaena. These mini trees are very popular and a truly striking addition to any part of the home. Pop your new plant somewhere with some bright but indirect light and give it some water when the top two inches of soil are dry. And that’s it! Job done!

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Part Time V Full Time Forex Trading

Many people dream of earning their living solely through forex trading, being their own boss, keeping their own hours…but how easy is it really to be a full time trader? On the other hand, some people wonder if it is really possible or worth the effort to fit forex trading around a full time job. 

 

So is forex trading really an all or nothing choice? Here’s a look at both sides of the coin. 

 

The pros of part time forex trading

The fact is, most people who are new to trading start off part time, combining it with their main job. This allows them to build up the skills and experience they need to become successful, without the pressure of trying to make a living from it. 

 

There is a low barrier to entry, with instant forex funding available through broker accounts. This means that anyone with a small amount of investment capital can start trading straight away, with no high stakes involved. 

 

For many people, this is a safe way to learn the ropes, because they are not risking their life savings and can continue to cover living expenses with the salary from their full time job. You will get to enjoy the benefits of an extra income source, without the need to make enough to cover your essential costs.

 

The forex markets are active almost 24/7, so even if you can only devote a few hours before 9am or after 5pm, there are still plenty of opportunities to make good trades. As a part time trader with a separate income, you will be free to experiment with your trading strategies, and learn what works best for you without the pressure of always being right.

 

The cons of part time forex trading

Fitting trading in around your full time job is a big commitment, and it can end up taking over your life. You may find that you have to make some compromises, such as having less time for hobbies, exercise, and seeing family and friends. Therefore you do need to be good at time management to maintain a reasonable work life balance.

 

The time constraints will limit the amount of trading windows you have, and in the fast moving forex markets this will inevitably lead to some missed opportunities to make profitable trades. You will also have less time available to carry out the technical and market analysis that are essential for developing a sound trading strategy. 

 

The pros of full time forex trading

Full time forex trading allows you to throw yourself into the game 100%. Successful traders need mental and emotional discipline, and the will to learn as much as possible about how the markets operate. This is an ongoing process, and you will have more time available to devote to technical and fundamental analysis. 

 

Ultimately, this will make you better at identifying the most profitable trading strategies and opportunities. As a full time trader, you will have access to the markets 24/7, giving you much greater scope to take advantage of periods of volatility, which can be a gift to the well prepared and skillful forex trader. 

 

As well as more scope to hone your skills, full time trading brings you the freedom and independence of being your own boss. You get to decide which hours you work, and the location that you work from. There are potentially no limits on the amount you can earn, unlike a routine job where you are on a fixed income.

 

The cons of full time forex trading

The decision to become a full time trader needs some careful consideration, especially if you intend to rely on it as your sole income source to meet essential living expenses. It takes some very careful financial planning to ensure that you will have enough capital to cover your losses if you go through an unfruitful trading period.

 

You also need to question whether you really have the skills and experience necessary to make consistent profits that are enough to support your lifestyle. Do you have a financial safety net, such as a passive income source from property or investments, or a partner who is willing to support you through leaner patches?

 

Forex trading can be a high pressure career, which takes up deep reserves of mental and emotional energy. This might not seem like a major consideration when you are new and fired up with enthusiasm, but over the long haul it takes discipline to guard against burnout. 

 

It is important to learn how to remain objective and analytical at all times, no matter how much stress you are under. Once you begin to let emotions such as fear and greed influence your trading decisions, it can soon turn into a downward spiral. 

 

How can you decide what is best for you?

Ultimately, successful forex trading requires a lot of hard work and discipline whether you are going into it full time or part time. Some people might decide to ‘go hard or go home’, while others might prefer a more cautious approach. Part time trading is not always the easier option, because it will put major demands on your spare time.

 

However, it really depends on your attitude to risk and your personal circumstances. If you have the financial security to cover your living expenses and a safety net to fall back on, then you may decide to take the plunge and go full time. 

 

How to make part time forex trading work for you

For many people, complementing their salary with the profits from a part time forex trading career is the most attractive and practical option. Thanks to the global nature of the forex markets, there are always opportunities available for fitting trading in around your main occupation. 

 

In fact, the major markets of London, Tokyo and Sydney are at their most active when they open at 8am, so if you work a regular 9-5 job, you are ideally placed to take advantage of the most lucrative trading opportunities. The New York markets are also active at the end of the day between 5pm and 9pm, so evening trading is well worth your time too.

 

The key is to pick the currency pairs that are most active during the times of day you are available to trade. Fortunately, for UK based traders who work daytime hours, this leaves plenty of options from the major currencies, such as the Euro/US Dollar, and the British Pound/Japanese Yen.

 

The particular trading strategy you pick will depend on your level of knowledge and experience, as well as your personality type. If you have strong technical analysis skills, then price action trading may be your best option. This allows you to execute trades within a brief trading window, by closely monitoring upward or downward market movements.

 

To be able to use price action techniques effectively, you will need to be able to quickly and accurately interpret line charts and bar charts to read which way the market is trending. You will also need to have the mental sharpness to enter or exit your trade at the right point in order to take the maximum profit.

 

Price action trading suits people who have quick minds but not a great deal of patience, because it allows you to make a series of several short trades within a limited timeframe. Although you will only potentially make a small profit from each one, the amount of trades means that profits can soon accumulate.

 

If you dislike making decisions under pressure, and prefer to take a long view of a situation, then making fewer trades and holding them for days or even weeks may suit you better. This is also a good strategy for part time traders, because you can check up on your positions when you are available, without the need for constant monitoring.

 

The importance of a trading routine

Whether you decide to give full time or part time trading a go, both approaches will only work if you follow a structured routine. This is especially important if you are going full time, and have never been self-employed before. 

 

It can be tempting to pick and choose what you do and when you work, but this is unlikely to lead to a productive trading career. Being your own boss has its perks, but you need to be disciplined enough to put in the hours and hard work. Contrary to popular belief, full time forex traders don’t spend all their time actually making trades.

 

Instead, they may spend some time at the beginning of each day getting into the right mindset, maybe with meditation or exercise. This can help you clear your mind and mentally prepare you for the rigours of the day. Some traders find it helps them to think more clearly in times of stress, which ultimately leads to better trading decisions. 

 

The next portion of the day may be spent reviewing the economic calendar and checking up on current market conditions. Only then will the trader begin to identify potential trading setups.

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The Factors That Shaped Modern Forex Trading

Modern forex trading is now one of the most popular and exciting methods of financial trading in the world, thanks to a liquid market which is easily accessible to anyone with an internet connection and a forex funded account. This is a relatively modern development of course, but the history of forex trading has deep roots. 

 

The concept of forex trading—that is, exchanging foreign currencies—can be traced back for centuries. The current market is shaped by significant events from the past, and it is useful for any forex trader to understand how these occurred, because history tends to repeat itself. Here’s a look at how it all began.

 

The early bartering system

It could be argued that modern forex trading began when prehistoric cave dwellers began to exchange animal skins for meat or flint tools. In fact, some societies in the world still use the bartering of goods and services as a means for survival, in place of money. However, using currency makes the whole process faster and (usually) fairer.

 

The first coins and notes

The world’s oldest known coins have been discovered in Guanzhuang in Henan Province, China, according to Investopedia. Archaeologists from the State University of Zhengzhou have dated the coins back to 640 BC. Records of the use of metal coins can also be found in the works of Greek poets from the 6th century BC.

 

It is thought that the Romans were the first to establish a centralised system for minting money, which was operated by the government. This is not so different from the centralised banking systems which still dominate today. 

 

It is thought that the first system of using paper notes instead of money was introduced during the 7th century BC in China. This was probably a result of the inconvenience of tradesmen having to undertake long journeys weighed down by bags of heavy metal coins. 

 

Apparently, early Chinese banknotes were printed with the blunt warning: “Those who are counterfeiting will be beheaded.” Of course, counterfeit bank notes are still a serious problem today, although the penalties are not usually quite so barbarous. By the Middle Ages, lower value coins made from copper rather than silver or gold were minted.

 

It took until the 16th century for paper money to become widely used throughout Europe and North America. This opened the gateway to increased international trade, as the whole process became quicker and more fluid. 

 

It also led to the beginnings of the first foreign exchange market, as banks and governments were able to buy currencies from other nations. 

 

The Gold Standard

The next major development in the history of financial trading was the adoption of the gold standard. This was a guarantee that a government would redeem an amount of paper money for its value in gold. By pegging a currency’s value to gold, this created a system where an economic unit was based on a fixed quantity of gold. 

 

Gold has been considered a precious metal since the earliest ages, because of its unique qualities of strength, malleability, density, and limited resources. It has always been used as a decorative metal and to made sacred artefacts, and it was used to make coins from about 700 BC onwards. 

 

The gold rushes and pillages in the New World in the 15th and 16th centuries intensified the gold trade wars, until eventually the Gold Standard was introduced as the basis for the international monetary system during the 1870s. In the US, a united national currency pegged to the value of silver and gold had already been in operation for almost a century.

 

However, England was the first country to officially adopt the Gold Standard in 1821. The international Gold Standard was consequently adopted by all the major economies by the beginning of the 20th century. This system flourished until the outbreak of WWI in 1914, when European countries became mired in war debt.

 

The supply of gold could no longer keep up with the growth of the global economy, and the use of the Gold Standard became unsustainable. Smaller nations began holding the US dollar and the Great British Pound as their reserve currencies instead of gold, thus reducing its fluidity even further.

 

To this day, the US dollar is the world’s biggest reserve currency, and represents the least exchange risk. This is why beginner forex traders, as well as many experienced ones, almost always include the US dollar as one of their currency pairs. 

 

Even those traders who avoid the USD still keep a close eye on its movements in the market, because what is affecting the value of the USD has a ripple effect on the direction of the whole forex market.

 

The Bretton Woods Agreement

The next major development occurred in 1944, with the historic Bretton Woods Agreement. This refers to the outcome of the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire, which was held in 1944. 

 

The conference was attended by delegates from 44 countries, with the aim of agreeing a workable foreign exchange system to promote global economic growth. The International Monetary Fund (IMF) and the World Bank, still two major global financial institutions today, were also created at the meeting, outlasting the agreement itself.

 

The key principles of the Bretton Woods Agreement had already been carefully prepared by the British economist John Maynard Keynes and the US Chief Economist, Harry Dexter White. The basic operating principle of the system pegged the US dollar to the price of gold, and all other currencies within the system were pegged to the value of the USD.

 

The idea behind the Bretton Woods Agreement was to help create a stable international currency exchange rate, which would facilitate more frequent and profitable international trade, and promote good trading relationships between countries. This worked well for a time, but by the early 1970s, the US gold supply had become depleted.

 

The Bretton Woods Agreement was abolished in 1973, because it was no longer adequate to support rapidly growing economies. However, the IMF and the World Bank still play an important role in supporting the development and functioning of the world’s emerging  economies. 

 

Today, the forex markets are mostly comprised of free-floating currencies which are subject to the pressures of supply and demand. However, central banks still have a means of influencing the forex markets, through the control of interest rates. 

 

That’s why it’s important for forex traders to follow the economic news, especially for any data releases involving interest rate rises or falls in the major economies. Rising US interest rates will have an influence throughout the entire forex market, because it will affect the value of the dollar, which is the most widely traded currency in the world. 

 

The Plaza Accord

By the 1980s, it was recognised that the strength of the dollar in relation to other currencies was stifling the economic growth of other nations. Therefore, the G5 group of the world’s leading economies, including Great Britain, France, West Germany, Japan, and the US, agreed to deliberately appreciate other currencies against the dollar.

 

This agreement was reached at a meeting at the Plaza Hotel in New York, and was therefore known as the Plaza Accord. The result was much greater fluctuation in the forex markets, which made for ideal trading conditions for the sharp-eyed forex trader, because the potential to make big profits was created by sharp upturns and downturns in price.

 

The creation of the Euro

The next significant event was the agreement between European Union nations in 1992, known as the Maastricht Treaty, to establish a major new currency. This led to the birth of the Euro in 1999, with 11 member EU countries adopting it as their currency. It has since grown to be one of the world’s major currencies, used by 19 EU countries.

 

The advance of the internet

The next major advancement of forex trading was brought about by the internet. Until the 1990s, only large banks and other financial institutions could access the forex markets, but the advance of the world wide web changed all this. 

 

Information which once involved a series of international phone calls and a whole team of traders could now be retrieved in seconds by a simple internet search engine query. 

 

At the same time, the globalisation of the world economy began to flourish as the Berlin wall came down and the Soviet Union dissolved. This led to a huge expansion in forex trading, as individuals as well as banks and merchants entered the markets. 

 

Today, anyone can open a forex trading account through an online broker, even if they have only a modest amount of capital to invest. High leverage means that there is potential for skilled traders to make good and consistent profits, and some individuals even make forex trading their full-time career.

 

More than $5 trillion are traded every day on the forex markets, with endless opportunities for the well-informed trader to make profits. It does take commitment and hard work, but learning to trade forex is certainly an exciting and potentially very lucrative venture. 

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Confidence V Arrogance in Forex Trading

The world of forex trading is fast moving and competitive, and it takes a certain amount of confidence to set out your stall and take part. Along the way, almost all new traders experience their fair share of obstacles and setbacks, which is all part of the learning process. 

 

Those with the determination to see it through will soon find a strategy that works for them, and will begin to taste the heady cocktail of excitement, success, and financial rewards that instant forex funding can offer. However, a run of good trades can sometimes lead to arrogance, and this is never a good way to approach the markets!

 

Overconfidence can be a very dangerous trait in the world of forex, because it can lead you to take unmanaged risks without enough objective evidence that the risk is worth the potential reward. In the worst case scenario, you could end up suffering damaging uncontrolled losses that leave you in serious financial straits.

 

On the other hand, an over cautious and timid approach to your forex trading is unlikely to bring you to a consistent level of profitability that makes it worth staying in the game. So how do you find that balance between being confident in your trading, and being hubristic and overconfident? Here are some points to bear in mind.

 

Recognise the difference between arrogance and self confidence

Before getting into more technical points, it’s worth spending some time thinking about the difference between arrogance and self confidence. Hubristic individuals who display high levels of assurance can sometimes be perceived as self-confident, and maybe they are. However, it is possible to be self-confident without hubris or excessive pride.

 

Arrogant traders believe that they are too talented or knowledgeable to fail, or even that they have some sort of magic touch. Unfortunately, all too often, this level of self belief is not justified by any objective evidence. Anyone can have a string of lucky breaks that might make them fall into this trap, but experienced traders will all tell you that luck runs out.

 

The truly self-confident trader needs to have a high degree of faith in their own abilities, but the difference between them and the arrogant is that they have good reasons to be confident. In other words, they have evidence that their skills and knowledge are based on sound and objective research and market knowledge. 

 

Being self confident doesn’t mean denying all possibility that you might fail: in fact, it means the opposite. Real confidence goes hand in hand with humility, because it is impossible for even the most experienced trader to avoid risk and loss in forex trading. Good traders base their strategy mainly around risk management.

 

They are also always willing to listen to the advice and opinions of others, no matter how sharp witted or well educated they may be themselves. A good forex trader knows that they don’t know everything, and there is always something new to learn, or a different take on a familiar topic. 

 

This doesn’t mean that they are willing to abandon their own strategy and be pulled and pushed around by every piece of advice that they come across, but rather that they have developed the independence of mind to objectively analyse new information, and put their own biases to one side. 

 

The hubristic or arrogant trader will almost always push away advice without giving it any well balanced consideration, because they believe that they know best. This can lead to a narrow approach to trading decisions, and sooner or later the result will be less profitable trades or losses. A previous track record of wins does not guarantee future success.

 

The dangers of reckless pride has been a theme for artists and writers for centuries, all the way back to the scribes of Ancient Greece. The word ‘hubris’ (meaning excessive pride or self-confidence) comes from the Greek goddess Hybris, who was the personification of arrogance, conceit, and lack of regard for others. 

 

Literature is full of examples of humbled heroes or heroines who fell to earth, quite literally in the case of Icarus from Greek mythology, who flew too close to the sun and melted the wax in his wings, despite being warned of the danger. It is a parable about the importance of humility which is very pertinent to forex trading. 

 

How to develop real self-confidence as a forex trader

One less discussed aspect of the tragedy of Icarus is that he was also warned not to fly too close to the sea, lest his feathered wings get wet and drag him down. This could be a parable for being over cautious, in life as in forex trading. The confident trader is always vigilant that they are flying well above the sea but not too close to the sun.

 

In less abstract terms, this means that their trading strategy is based on a good understanding of the way the forex markets work, some sound application of technical analysis, and knowing their risk tolerance. All this is underpinned by the ability to detach their trading decisions from their emotions.

 

This can sound like a lot to take on board, and it does take some time and discipline to make everything fall into place. There are no real substitutions for commitment and hard work when it comes to developing great trading skills. However, as with any overwhelming task, the best approach is to break it down into a series of smaller tasks, so let’s do just that!

 

Figuring out your risk tolerance

Before you even think about making your first live trade, you must first work out your risk tolerance. This means working out the maximum amount of money you can afford to lose on each trade and setting well defined boundaries. This way, you will always protect yourself from the kind of damaging losses that would affect your ability to pay for life’s essentials.

 

You don’t need large amounts of capital to open a forex account, because there is high leverage available, but this carries the risk of uncontrolled losses. Therefore, you should always trade with a 1 or 2% margin at the most, at least until you have a lot more experience. 

 

Read up on market analysis

Knowledge is power, and the more background knowledge you have about forex trading, the more quietly self-confident you will feel. However, don’t feel intimidated or inadequate if you don’t have a degree in macroeconomics. It’s a huge topic, and no one can know everything. In fact, bringing too much into the mix can overcomplicate your strategy. 

 

One of the best approaches is to learn about the main factors that influence the markets, such as differentials in interest rates, unemployment rates, and GDP of the countries whose currency values you are going to be trading. 

 

Most new traders focus on a few of the major currency pairs, such as the US dollar, the Euro, the Great British Pound, and the Japanese Yen. Even if you do not intend to trade with the USD, bear in mind that it is the world’s largest currency, and what affects its value tends to cause a ripple effect throughout the whole forex market. 

 

Learn some technical analysis skills

To be a confident trader, you should understand the basic concepts of technical analysis such as how to read line charts and trend lines. Once you have figured out which type of analysis works best for you, remain consistent in your approach rather than chopping and changing at every twist in the road. 

 

Develop a daily trading routine

Planning out each day, so that you know what times you will be trading and what tasks you need to accomplish during each session can help you to feel more in control. It also mitigates against the risk of human error, because you can tick each task off your checklist as you go along. 

 

Avoid revenge trading at all costs

Some people react badly when their confidence is shaken or their pride is wounded. A common pitfall is to ‘revenge trade’ after a painful loss, in an attempt to make up for lost funds or lost bragging rights. However, this is likely to lead to ill judged decisions, which are clouded by your emotions rather than based on objective analysis. 

 

Instead, it is always best to step away and have a cooling off period after a bad result. Take a look at your reasons for making the trade, and try to work out what went wrong. How could you approach it differently? Knowing when not to make a trade is just as important as knowing the right time.

 

Above all, stay humble

If it’s all starting to come together and you are raking in steady profits, remember that this is not the moment to let your guard down. Sure, enjoy your success and reflect on what you have got right, but remember that you are never bigger than the markets. To remain competitive as a trader you need a constant system of checks and balances.

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Why A Weak Ego Has No Place In Forex Trading

While every trader will develop their own unique personal style of trading over the years, there are a couple of golden rules and a few universal truths that will always apply, no matter who you are and how long you’ve been trading.

 

Getting to grips with these early on will really stand you in excellent stead if you have plans in mind to make a lucrative career out of forex trading.

 

The most important of these rules is something that we blog a lot about – and with good reason. If you fail to prioritise it, then you’ll never reach the upper stratospheres of trading success.

 

We’re talking, of course, about emotion. More specifically, the importance of keeping your emotions in check, both good and bad.

 

Being a good trader is about being self-aware and being honest with yourself about your best and worst qualities, your strengths and your weaknesses.

 

Arming yourself with this knowledge will help you focus your attention where it’s needed so you can build resilience and become a better trader, more capable of reacting in positive ways that will only benefit you on the trading floor.

 

Turn the lens inward and think critically about your emotional responses to both positive and negative stimuli. Are you levelheaded? Can you remain objective and rational? Or do you find yourself panicking, stressed out and anxious in the face of failure? Are you self-congratulatory and peacocking when on a winning streak?

 

Uncontrollable emotional responses to trading events and outcomes will ultimately spell your end as a trader. Initial emotions are to be expected while trading (as they are in life) but if you let these overwhelm you, your performance will be affected and you’ll find yourself facing losses with increasing regularity.

 

Something to be particularly mindful of is the concept of the ego. In psychoanalytic theory, the ego is the part of our personality that we experience as the “I” or the self, giving us consistency of behaviour and continuity throughout our lives by giving us a way to relate to past events with our actions now and in the future.

 

The ego can change as the years go on and it can be influenced by all sorts of factors, so even if you have a strong ego right now, one that’s working hard for you and keeping you on the straight and narrow, you could easily develop a weaker ego later down the line. So be on your guard for that, as it could affect your trading abilities if you don’t pay due care and attention.

 

What is a strong ego?

 

Ego strength is a concept that traders might find particularly interesting if they’re keen to improve and grow their career as they’d like.

 

A strong ego is one that serves you well, characterised by the ability to view both the external world and the inner self objectively, the ability to follow personal resolutions through to completion and the ability to choose decisively when presented with different alternatives.

 

Wondering if you have well developed ego strength? Ask yourself if you’re optimistic, resilient and are highly capable of handling challenges when they come your way.

 

If you adopt a learning approach to life, are able to tolerate discomfort, can regulate your emotions and look at life with a curious mind, one that embraces the idea of change, you’re in an excellent position… and you should see this outlook and state of mind reflected in your trading performance.

 

The better your ego strength is, the more likely it is that you’ll be comfortable in taking control of your problems and finding workable solutions, looking at the bigger picture and seeing what can and can’t be changed – and how best to react to this in a practical and proactive way.

 

What is a weak ego?

 

In contrast, a weak ego will actively work against you, characterised by a lack of resiliency and a yearning for what feels comfortable… whatever that may be. If something doesn’t feel comfortable, a weak ego will do all it can to steer well clear, which means that progress will be hampered and your growth as a trader (and a human being) will falter.

 

An individual with a weak ego will typically have unrealistic expectations about outcomes, expectations that are firmly rooted in their psyche by core beliefs that are rooted in anxiety and fear.

 

This means that they’re likely to be stuck in damaging thought patterns that have the potential to make them think they don’t have the resilience or resources to handle situations that crop up.

 

It can be very difficult to break these patterns and a weak ego can make other paths seem impossible, which gets in the way of developing ego strength and leaves us stuck in a repetitive loop of problematic behaviour, such as impulsiveness.

 

Think back and be as honest as you can with yourself about how you reacted during recent trades. Did you rely on defence mechanisms like denial or losing your temper?

 

Were you able to accept what happened and move on quickly, or did you find yourself lost in a maelstrom of emotion, unable to process your feelings sufficiently to give you the freedom to move on and focus on future trading opportunities?

 

Being able to identify where you’re stuck and what you need to do to help yourself will be key as a trader, so now’s the time for (potentially) brutal honesty. What vulnerable areas will you find to work on?

 

How to improve ego strength

 

The most successful traders out there know that in order to win big and win big consistently they need to be motivated and dedicated to the fine art of forex. It’s not something that can be dabbled in if the ultimate goal is to be a professional trader. You have to give it your all, or you’ll flounder sooner rather than later.

 

The same is true for building up ego strength… it takes time, effort and a lot of dedication, so be prepared to put the hours in. The good news, however, is that you’ll start to reap the rewards relatively quickly and this is sure to spur you on, as you see how it translates to trading success.

 

Developing insight and self-awareness will be key to amassing ego strength and a good place to begin is with journaling. This is something that we advocate strongly for and all the top traders out there will track their progress as they go, making it easier to identify vulnerable areas within yourself so you can grow and evolve.

Taking yourself out of your comfort zone deliberately and exposing yourself to new experiences and ideas, trying out new strategies and ways of working, can also help build up ego strength.

 

You need to start challenging yourself and your own thoughts and beliefs, about yourself and about the outside world, if you’re to rid yourself of your weak ego and forge ahead with your trading plans.

 

Once you’ve done some ego work, you’ll find that you’ll become increasingly competent at deciding how you feel and what you think, as well as how you want to respond, instead of relying on your ego to do all the hard work for you.

 

When a weak ego is in charge, you’ll quickly be led astray but the more you regain control, the more work on your inner self you’ll actually want to do.

 

Alongside your journaling, what about practising saying positive affirmations to yourself? It can be incredibly beneficial to repeat certain phrases and statements to yourself over and over again, helping you to reconnect with your inner self, build resilience and feel stronger overall.

 

Try out statements like “I can do anything I put my mind to”, “I am the master of my own destiny”, “I am stronger than my fears”, “I believe in myself”, “it’s OK to step outside my comfort zone”… and so on.

The more you say these phrases to yourself, the more they’ll be absorbed into your psyche and the easier it will be to enact the practical steps required in order to achieve what you want. Fake it till you make it, in a sense!

 

Affirmations have long been a go-to for many a successful trader over the years and it could be a good place to begin if you’ve been feeling a little stuck in a rut with your trading performance of late. So why not give it a go today and see what difference it could make?

 

Looking for a new forex funding program at the moment? We have a range of options available so have a browse of our site to see which one is the right fit for you.

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Who Are The Most Successful Forex Traders In The World?

Anyone embarking on a new venture in life needs some guidance and inspiration to set them on the right road. By reading about people who have successfully forged a path before us, we can gain confidence in our own future, and also pick up some useful advice along the way.

This is as true of the world of forex trading as it is of sport, politics, or any other field of endeavour. There have been some extremely successful forex traders over the years, even if they are not all exactly household names. Here’s a look at some of the best and most influential currency traders in history, and what we can learn from them.

George Soros

By most accounts, George Soros is undisputedly the most successful forex trader of all time. He was born in Budapest in 1930, and emigrated to England during the Nazi occupation of Hungary. He studied at the London School of Economics and embarked on a banking career. 

Soros worked for a series of merchant banks in London, before moving to the United States and starting his first hedge fund in 1969. In 1973, Soros established his own financial firm, Soros Fund Management, which became highly successful, making multi-billion-pound profits.

However, Soros will be forever known as “the man who broke the Bank of England”, after he sold 10 billion US dollars’ worth of pounds sterling during the Exchange Rate Mechanism (ERM) crisis of 1992, earning $1 billion.

This is the most classic example of why it pays to follow the economic news on a global scale to help you make good trading decisions. The ERM was a fixed exchange rate agreement between a coalition of European countries, which between 1990 and 1992 included the British pound sterling.

The other countries in the ERM wanted the UK to devalue the pound so that it stayed within the fixed parameters of the agreement.  However, the prime minister at the time, John Major, and the Chancellor, Norman Lamont, resisted the pressure.

Eventually, they were forced to withdraw from the ERM amid a market frenzy of buying and selling. The subsequent crash of the pound’s value came to be known as Black Wednesday. Forex traders such as Soros who had been following events closely made multiple rapid sales of the pound during the crisis, as the Bank of England was obliged to accept any offers.

Soros has claimed in interviews that he often follows a gut instinct when trading, which goes against much of the advice given to new traders. Some people believe that because Soros is so well informed about economics, he can rely on his existing knowledge of the market more than most people, which is why he is a seemingly instinctive trader.

The vast majority of traders will never reach this level of instinctive ‘gut reaction’ modus operandi. It is always a knowledge of the markets and technical analysis that will ensure steady success as a forex trader. Another point to bear in mind is that as a multi billionaire, Soros has a high-risk tolerance and can stand to make heavy losses if necessary.

For most traders, working out a risk management strategy to avoid incurring damaging losses should be a top priority. Soros is said to have a person fortune of £8 billion, and has given away a large portion of his wealth through his Open Society Foundations, which work to support humanitarian causes around the world. Certainly lots of food for thought.

Stanley Druckenmiller

Druckenmiller was born in Pittsburgh, USA, in 1953 and studied English and Economics and Bowdoin College in Maine. After graduating, he embarked on a financial career at the Pittsburgh National Bank. In 1988, he was employed by George Soros at the Quantum Fund. The two worked together to pull off the legendary $1 billion Bank of England (BoE) trade.

In rare interviews since, Druckenmiller has said that despite the stunning success of their strategy, neither of them was 100% that the pound sterling would fall at all, or by how much. However, what he did very much understand was the risk/reward ratio. This is a way to measure the potential of loss on a trade versus its potential profit.

Once you have calculated the potential risk and reward of a trade, you can then divide the risk by the reward to find the ratio. This gives you a useful method of deciding whether a trade is within your risk tolerance margin, and how much it is worth risking per trade.

In more technical terms, it is the difference between a trade entry point and a stop loss order and a take-profit order. A risk/reward ratio of less than one means that the investment carries a greater potential reward than a risk. A ratio greater than one means that the risk outweighs the potential reward.

Druckenmiller has said that he calculated a risk/reward ratio of 40:1 on the BoE trade, meaning that he knew there was the potential to make forty times more than he was risking. While this is no guarantee of profit, and risk/reward ratios do not take into account the odds of making a successful trade, it’s certainly a useful tool to have in your skillset.

Bruce Kovner

Bruce Kovner is an inspiration for those who are embarking on forex trading for the first time, after following other paths. He was born in New York in 1976, and studied political economy at Harvard. Despite being a high achieving student, he did not initially settle into a career, but had a series of jobs including a writer, cab driver, and political campaigner.

In fact, he not make his first trade until 1977, when he was 32 years old. He borrowed $3,000 on his MasterCard, and saw his trade grow to $40,000, before dropping to $23,000, at which point he made a sale.

Since this initial rather lucky gamble, Kovner learnt to take risk management very seriously, and forged a successful career by making well informed and objective trading decisions. He founded the highly respected Caxton Associates before retiring from forex trading in 2011.

Kovner’s career is an example of how a sound risk management strategy is the cornerstone to success in forex trading. His nerve racking early gamble paid off, but he was smart enough to realise that gambling doesn’t lead to consistent profits. Forex trading is not about the relentless pursuit of profit; rather it is the vigilant assessing of risk.

Good traders always know how much they can stand to lose on each trade, how much leverage is safe for them to work with, how to select the right position size and use stop loss orders, and how to calculate risk/reward ratios. On top of all this, they are aware of the importance of managing their emotions.

Trading the forex markets can cause even the most stoical personalities to be influenced by excitement, greed, fear, anxiety, or even boredom. By letting your emotions inform your trading decisions, you will end up making poor judgement calls. Most experienced traders use some method of overriding those ‘gut feelings’ and staying strictly objective.

Bill Lipschutz

Another highly successful and respected trader who learned about risk management the hard way is Bill Lipschutz. He was born and raised in New York, and began trading while studying at Cornell university. Early in his career, he made $250,000 from a $12,000 investment, but subsequently lost it all on another trade.

Many people would not recover from such a substantial loss, but Lipschutz doubled down on his determination to be a successful trader. He says that he has subsequently learnt to always focus on a 3:1 risk/reward ratio, i.e. a three dollar return for a one dollar risk.

During one interview he commented: “If you make any mistake in calculating the trading size and winning or losing trade, you may have to pay the price with your trading capital. However, it is also essential to understand the big picture of the market, which is a crucial element of price action trading.”

Lipschutz has also commented that the best traders have a sharp eye for detail, are highly focused with a strong work ethic, and understand the markets very well. He also seems to have learnt a powerful lesson from his early mistake, which was perhaps driven by overconfidence or greed.

He advises that while it is important to control the emotions, traders should never become numb to the pain of a loss, which can lead to a swift downward spiral.

He says: “When you go through a losing streak, all the self-doubts come out and you do get very reluctant to pull the trigger. There is nothing you can do that is right. Just every single thing you do is wrong.”

“That is something you just have to learn to control. You really have to learn how to control that fear. You have to feel the pain of a bad trade, or a wrong trade. If you don’t, and are numb to it, then it’s over.”

There is certainly a lot that anyone with a forex funded account can learn from studying the careers of these four inspirational traders.

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How To Deal With A Difficult Trading Day

Even the most careful and conscientious traders will occasionally have a bad trading day. Sometimes, they may even have a bad trading week. It happens to everyone now and then, in life as well as in trading. If you have suffered a painful trading loss, you may even question whether it is all worth it, and be tempted to throw in the towel.

However, what’s important is how we deal with the situation. Most of the time, a step back, maybe a day or two to get a fresh perspective, is all that is needed. It might sound like a cliché, but when things go wrong, it’s an opportunity to learn from the events, so we can take a better approach next time.

 

The negativity bias

In psychology circles, the human tendency to dwell on negative events is known as the ‘negativity bias.’ It’s not a sign of personal weakness, but a normal human trait that almost all of us have to some degree. Scientists believe that the habit of keeping negative events foremost in the mind is an evolutionary function which is hard-wired into the brain.

This is because in the past, humans had to remain vigilant for predators and threats to health to ensure their survival. Therefore, hazardous events are foregrounded, while more pleasant or benign events can get forgotten. This is still true to a certain extent today of course: children still sometimes learn from getting themselves into a scrape.

However, as adults, this tendency can have a less favourable outcome, as it can lead us to take failure and criticism too harshly. This can become a real problem for some people, as even events which don’t matter in the long run can loom large in the mind. They may wake up in the early hours of the morning, and ruminate endlessly over the same memory.

There are various ways of breaking out of this negative thought cycle. One of the most effective techniques is to challenge the negative thought, by detaching the facts of the case from your emotions, to try and view it in a neutral light, much like an outside observer would.

Once we have examined the negative thoughts and emotions for supporting evidence, often we find that there is little or none. There may well even be positive elements to the situation, which we have failed to take into account.

It can feel uncomfortable at first to face difficult feelings, but it is much more powerful and constructive to face up to them, rather than keep them locked away, eating up precious time and emotional energy. Confronting the issue head on, rather than the narrative that has built up inside our heads, can bring clarity and a new sense of purpose.

For forex traders, this may be a process of realising that making losses is a normal part of trading, and even experienced traders accept that not all of their trades are successful. A failure is not always an event you should take personally, especially in the world of forex.

If you have experienced a bruising trading loss, and you are still having trouble bouncing back from the experience, maybe even questioning whether the game’s worth the candle, then this can open a door to the next strategy…developing a growth mindset.

 

Developing a growth mindset

There has been a lot of talk about resilience over the past few years, as we have all lived through some difficult times. Resilience is all about the ability to recover from negative events. Some of this may be down to our natural characters: some people are born fighters, while some people seem to lurch from one crisis to another.

Whether this is down to our upbringing and environment, or our genetics, is a huge topic, and not really the issue on hand right now (although it makes for some interesting reading if the topic tickles your pickle).

What is relevant and interesting for forex traders is that scientists believe that resilience is not a fixed character trait, but something that can be learnt by anyone who is open to the idea. However, this is not simply a version of the old advice about dusting yourself down and trying again, getting back in the saddle, and all the rest of those familiar sayings.

In fact, doubling down on your efforts in the belief that you are showing grit, determination, doggedness, and tough-mindedness, may just mean that you are…well, doubling down on failure. Repeating the same actions over and again in the hope that something will turn out differently can just layer on the disappointment.

Psychologists refer to this state of mind as a ‘fixed mindset.’ It can lead us into a cycle of negative thoughts and actions, which can seem impossible to break out of, as we have previously discussed. The ‘growth mindset’, on the other hand, is all about the ability to look objectively at the problem, and adjust our actions accordingly.

For a forex trader, this may mean taking a look over a trading strategy or journal to identify any elements which aren’t working. If you keep a journal of all your trades and the outcomes (which is recommended to help you revise and refine your techniques and strategies), then try and identify patterns which are common to your unsuccessful trades.

You may notice something about your timings, exit strategy, frequency or volume of trades, for example, which is impacting negatively on your progress. Experiment with a different way of approaching your next few trades, and record your progress.

It may not lead to immediate improvements, but it is better than following a strategy which is not leading to consistent profits, in the hope that things might turn around. Making adjustments based on logic and evidence is the best path towards lasting improvements, both in forex and in life.  

 

Are you REALLY sticking to your trading plan?

One of the most common causes of unsuccessful forex trading is a lack of a solid trading plan, or the failure to stick to a plan. Even if you are a naturally impulsive person who prefers the inspiration of the moment to forward planning, you still need to follow a trading plan if you want to start taking consistent profits in forex.

The trading plan is all about risk management, and it should be drawn up after you have done as much research as you can into market analysis and behaviour. It should address the basic issues, such as how much capital you want to risk per trade, how many pips you will target in each trade, and what your rules for entering and exiting trades are.

The plan should be referred to for every decision that you make, because otherwise, you will be vulnerable to making emotion-driven choices, which have no basis in considered analysis of the markets.

As we have previously discussed, it may sometimes be necessary to make tweaks and changes to your plan, rather than continuing to repeat an unsuccessful pattern of trading. However, this should be done in an analytical and informed manner, and not based off your emotions, such as a desire for revenge, to make good on a loss, or greed for profits.

This brings us to the next point…

 

Have you read up on trading psychology?

We have already discussed how fear can lead us to become mired in a sea of negativity, where we become too sensitive to perceived threats. Of course, sometimes we need a sense of fear to stop us making dangerous mistakes. However, in forex trading, an overdeveloped sense of fear can lead to unsound decisions.

It is natural to fear losses, more so than to seek profits. This may mean that you are closing trades too early, at the first flicker of bad news, or on the other hand, entering trades too readily, for fear of missing out on a good profit. Neither of these approaches will amount to a sound long term strategy.

Even more dangerous than fear is greed; the desire to make bigger profits as quickly as possible. It can be intoxicating, giving you an artificial sense of power and control. However, forex trading is all about risk management, and greed is the antithesis of this, leading to illogical and destructive behaviour.

Greed is related to two other powerful emotions which can ruin your prospects of successful trading: revenge and excitement. If your desire to make profits has been thwarted, it can spur you on to take even more aggressive risks in an attempt to recoup your losses. This will lead to poorly thought-out decisions, based on emotion and not logic.

Lastly, the euphoria of success can create a heady cocktail of emotions which makes you overconfident, and take risks which are not supported by your trading plan. To avoid falling prey to any of these emotions, the first step is to acknowledge that we are all human, and we are all prone to them—it is normal, and not a sign of weakness.

If you are having a difficult trading day, don’t beat yourself up. Just step back and step away from your emotions. Review your trading journals and plan if need be, and return to trading with a clearer mindset, and the willpower to choose logic and strategy over instinct.

 

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