Category: Traders mindset

There is only one true path to success in the financial market, although it is easy to think that there might be two.

The deceptive shortcut to success is the idea that a small number of big, risky trades will make so much money so quickly that you meet your targets as a prop firm or individual trader and just coast throughout the rest of the quarter. This almost never ends well.

In reality, the long road to success is the only way to succeed as a trader and investor rather than as a casino capitalist, for reasons that will be covered alongside the benefits and methods behind cautious, consistent trading.

In this guide, we will explore the fine art of consistency in the financial world, how to resist the pressure and temptation to make huge market plays, some particular strategies that benefit from a consistent approach, and how to manage your time as a trader.

Marathon Not A Sprint

Becoming a master of any skill and sowing the seeds of success takes time, regardless of the field you are in. People are not born able to run a marathon; it takes months for a baby to even learn to crawl, let alone stand on their own two feet.

The first step to improving as a skill is understanding that it is absolutely fine for it to take time. A weightlifter does not start throwing around atlas stones but instead starts by stretching their muscles, lifting their own body weight and lifting smaller dumbbells as their muscles build up.

Similarly, a guitarist does not pick up their first guitar immediately able to play the guitar solo to All Along The Watchtower. It takes gradual building up not only of their finger dexterity but also their musical knowledge to the point that complex arpeggios become second nature.

Trading is very similar to this, in the sense that progress very often comes in waves and does not always correlate with results.

You can have a successful few days whilst making some fundamental mistakes, and other days you can make a very carefully calculated move and have it go down in flames when it was not necessarily your fault.

Valuing consistency and prioritising becoming a consistent trader will not only make you a better trader and boost your career, but it will also save you a lot of the stress that comes as part of the market.

What Is Trading Consistency?

Most people will have a very good working definition of consistency in their everyday lives; if something is consistent, it is expected to be reliable, coherent and repeatable. If you do the same action, you will get mostly the same result.

Consistency in trading is not necessarily about getting the same results, but is more about using the same approach and methodology with every single move you make in the market, sticking to a certain number of trades, a particular level of risk and having a consistent mindset when it comes to analysis.

Because the market is inherently volatile and not consistent, being a consistent trader is not about getting the same results but executing a robust strategy and routine that will help your portfolio grow to meet your targets and avoid the pitfalls that come from fear and greed.

Suffering From Success

Consistency is important because the pressures of trading, meeting your targets and ensuring you avoid drastic drawdowns amidst the constant fluctuations and noise of the market can be overwhelming, especially if you are the type of trader who tends to micromanage positions.

A short-term loss can be quite an emotional hit, and this can cause traders to make moves that are not necessarily wise.

A rather infamous example came from one of the world’s best and otherwise most consistent traders, Stanley Druckenmiller.

Most famous for working with George Soros and the Quantum Fund to short the pound in 1992, Mr Druckenmiller moved from forex to technology stocks and made one of the most infamous and costly emotional trading blunders ever.

He correctly spotted the bubble in the technology sector in 1999, but shorted too early, losing money. He made that money back, sold his technology stocks in 2000 but then decided to invest again literally an hour after the Nasdaq peaked in March, losing billions of pounds and ultimately forcing his resignation.

This story shows the perils of emotional trading and how even the best and brightest financial minds can be swayed by heuristics, biases and emotions, Whilst emotional trading is most obviously an issue when a trade goes badly, it can be potentially even worse in the long term if a bad trade goes well.

Whilst a well-planned, carefully executed position ultimately leading to a loss due to volatility in the market or an outright black swan event can be utterly devastating, it can also prove to be a learning experience and a trader can come out stronger if they analyse what they did right.

On the other hand, if someone puts a lot of their money in one risky trade and by complete chance it turns out to be highly profitable, what lesson will the trader learn from their position?

They will learn that whatever they did, even if it was laughably risky and irresponsible, was the right move, and something they should repeat in future trades. They may have made a lot of money then, but it encourages habits that will lose them even more money later.

This can be such a problem that some traders enforce a consistency rule or profit limit, where they try to avoid having the profits of a single trading day account for more than half of their total profits for the month.

Other traders will analyse their performance not based on profits but based on how closely they followed their trading plan to do so. If they let themselves get swept up in emotion, they will note that down in their journal and continue following their plan.

Not every trader needs to do either of these steps, but they can be good methodologies to follow if you are worried that you might be swept up in either a bad day or a jackpot.

What Can You Do To Be More Consistent?

Consistency is the biggest ingredient for traders to be successful, profitable and financially stable both now and in the future. At the same time, however, it takes time to build a foundation of consistent trading, especially if you are relatively new to your sector or to prop trading in general.

The first step, as it is when learning any skill, is to be receptive to learning and developing as a trader. If you are concerned about consistency and want to learn to be a less volatile trader, you have already put yourself in a very good position to improve as a trader in the long term.

As well as this, it is vital that you are patient, not only with the market but with yourself. Depending on your strategy and how much you fixate on the price action, stocks, currency pairs and other assets can fluctuate in price at a truly alarming and overwhelming speed.

You need to look for the trends in those micromovements rather than fixate on the random noise of the market, and use as much information as possible to inform your decisions.

Set a limit to how many trades you can do in a day. Not only is this important to maximise your profits, given that every trade will inevitably incur fees, but it can also reduce the risk of overtrading, where you buy stocks and enter positions just to enter them.

Being patient with yourself means taking neither gains nor losses personally or as a barometer of your skill. Ultimately, every trader will have a losing trade at some point in their career but actualising that loss can be the most effective move you can make. If you feel yourself getting swept up in your emotions, whether it involves angrily chasing losses, gleefully letting unexpected price spikes ride or being scared about your position when it fluctuates in real-time, feel free to take a step back from your terminal and take a break.

Not trading is sometimes the best trade you can make.

Have a robust trading plan that takes as much emotional strain out of the equation as you can. Use a few methodologies for analysing whether a trade is worth executing and stick to them.

Keep a journal of your trades as well, including notes on how you feel about the trade, what you felt went right and how you feel you could improve your methodology.

As well as this, make sure you set take-profit and stop-loss orders, to maintain a consistent level of profit, and utilising carefully considered risk management strategies will help you to be the best trader you could possibly be.

This means having clear entry and exit points, how much you are willing to risk on a given trade and ensuring you have a diversified portfolio where one bad trade will not have a contagious effect on the rest.

We’ve said it before and we’ll say it again… the key to becoming the best forex trader you possibly can be is to become more self-aware.

Yes, of course, you do need to understand the technical aspects of trading and you do need to be able to identify potentially lucrative opportunities through statistical data analysis, but if this is your sole focus and if you don’t turn the lens inwards at some point, you’re sure to see your success start to plateau.

Deepening your understanding of who you are as a person and what your particular strengths and weaknesses are will show you just what you need to dial down on at a personal level to help give your trading performance a long-lasting boost.

It can be difficult to admit to yourself just what your weaknesses are but the more you push past the discomfort, the easier it will become. The more tough conversations you have with yourself, the more you’ll see that doing so ultimately gives you the freedom to grow and develop… and this is when the real work starts to take place!

One particular trait that many traders have in common is perfectionism.

These traders usually have incredibly high exacting standards, so much so that they put increasing amounts of pressure on themselves to meet these standards. When you couple this with the perfectionist’s tendency to be very self-critical, you can see how it might be a recipe for disaster.

Perfectionists are also typically incredibly well organised and thrive on structure, are often hyper-aware of every little mistake they make and often find it very difficult to move on from perceived errors.

This, in particular, can prove to be the downfall of many a perfectionist trader as it’s vital to learn from the mistakes you make along the way if you’re to improve and progress. If you fixate on mistakes and are unable to let them go, you’ll never see the success you’re looking for.

Of course, this isn’t to say that a little bit of a perfectionist attitude isn’t a good thing and if you’ve identified these characteristics within yourself, you can turn them to your advantage if you’re clever about it.

Yes, perfectionism can be a very real burden, one that can cause a huge amount of stress and burnout (every trader’s worst nightmare!) because of the amount of pressure you put on yourself to meet your own impossibly high expectations… but, conversely, herein lies the answer.

What if you were to aim to be a good perfectionist?

One who sets high standards, yes, but standards that are ultimately very achievable through hard work, determination, motivation and perseverance?

These are all skills and traits that the most profitable traders will have in abundance, so it stands to reason that you could develop these in such a way as to help you keep your perfectionism under control and working for you, instead of against.

So, if you do believe yourself to be a perfectionist, now’s the time to take a big step away from the trading desk and indulge in some self-reflection to see if this trait is doing more harm than good.

If you come to the conclusion that this is in fact the case, try to adopt a more non-judgemental approach, give yourself a break and set yourself more realistic goals, ones that you’re more likely to achieve.

Take it step by step, bit by bit and you’ll soon get where you want to be, without experiencing the high anxiety and stress levels that are the natural bedfellows of bad perfectionism characteristics.

The dangers of perfectionism

While perfectionism can drive success to a point, it can quickly become problematic and it can quickly take its toll on your mental and emotional health and wellbeing if you’re not in tune with yourself and honest about how you’re feeling.

Part of the problem for perfectionists is that they often feel as though nothing is ever good enough, no matter what. Even if they hit their goals, they often experience a sense of dissatisfaction and they often struggle to find joy in what they’re doing.

This can then lead to feelings of low self-worth and you can find yourself trapped in a web of negative self-talk and thought patterns, which in turn can quickly spiral into all sorts of debilitating mental health conditions, everything from stress, anxiety and depression to obsessive compulsive disorder.

Interestingly, perfectionism can also lead to procrastination and extreme task avoidance, driven by a fear of failure – something that can really have a big impact on your trading performance.

Procrastinating every now and again is normal and something all of us can expect to experience from time to time but if it’s really starting to get in the way and stopping you from completing the necessary tasks you need to each day, it’s certainly something you’ll need to get on top of if you do want to become one of the top forex traders out there.

What you need to do now is to see how you can take this trait and make it work towards your advantage, transforming yourself into an adaptive/positive perfectionist. This means you’ll be in a position to set those high standards and have those lofty goals in sight, working relentlessly to achieve what you have in mind and enjoy the journey at the same time.

Positive perfectionists are those with a growth mindset, people who love nothing more than being challenged and rising to these challenges, solving problems successfully as they go.

In short, their perfectionism becomes a strength, rather than a weakness… and this is exactly what perfectionist traders need to prioritise if they want to reach the pinnacle of success.

How to overcome your perfectionist traits

Once you’ve identified that you do have perfectionistic tendencies, that’s half the battle won! Admitting it to yourself puts the power back in your hands and gives you greater control over your own life, allowing you to make the necessary changes to overcome it.

Start off by challenging your thought patterns, your behaviours and your beliefs. Write down a list of pursuits that you absolutely have to be perfect at and why you believe this has to be the case.

From there, you can start working out different strategies to help you overcome these thoughts and behaviours, giving yourself tools and resources to fall back on when necessary.

Another effective strategy (away from the forex markets) is to give yourself the opportunity to fail. This can be hard at first and you probably won’t like making mistakes, but doing so gives you the opportunity to learn and grow as a person – and as a trader.

Why not find a new hobby or pastime that you’ve never tried before, something that you probably won’t excel at in the beginning.

Rather than trying to be the best or trying to perfect the art, simply aim on having fun and enjoying yourself as you learn and slowly improve. What you’re likely to find is that the mistakes you make are a vital part of your development in your chosen activity… and the same is certainly true for the trading floor.

It’s also important to check in with yourself regularly and pay close attention to your feelings and emotions, something that is actually essential for all traders, whether they’re perfectionists or otherwise.

Paying attention to yourself emotionally and identifying how you feel about certain tasks or jobs may be an indication that you’ve set yourself an impossible goal, one that you’ll struggle to achieve.

Simply listen to what you’re trying to tell yourself and make adjustments to your goals accordingly – and if you catch yourself engaging in negative self-talk, stop and try to flip this on its head with some affirmations to help encourage more positive thinking.

And, finally, make sure that you keep the bigger picture at the forefront of your mind at all times. All the most successful traders out there are able to keep their ultimate goals in the picture frame so that everything they do and every decision they make helps to take them one step further in the right direction.

Maintaining a big-picture perspective allows you to see the connections between the smaller daily tasks you do and your long-term goals. Ultimately, this means that you’ll cut the distance between the two, making the journey more efficient – and more enjoyable.

This means leaving your perfectionist tendencies at the door, prioritising quality over performing each task perfectly in its entirety although, of course, this is often easier said than done.

As with anything, you need to give yourself time and be patient with yourself to ensure you progress and don’t go backwards. Simply take your time, don’t rush and don’t expect to see results overnight. Put less pressure on yourself and you’re sure to reap the benefits sooner rather than later.

Forex trading is a demanding but potentially rewarding activity that requires a good understanding of the political and economic factors that drive the market, as well as technical analysis skills. However, to fully master the nuances of forex, it’s also important to understand the psychology of trading.

There are numerous resources available on this topic, but one of the most useful and insightful guides is Prospect Theory, which was first introduced in 1979 and developed further in 1992 by Amos Tversky and Daniel Kahneman, and won the Nobel Prize in Economics.

Here’s a closer look at what Prospect Theory is, and how it can be applied to forex trading so you can make the most of an instant funded account.

Understanding Prospect Theory

Prospect Theory is based around the concept that traders value losses and gains differently, and that they place more value on potential gains than potential losses, even if the possibility of both is equal. It’s part of the wider theory of behavioural economics that accepts that people do not always make rational and unbiased decisions when dealing with finances.

Kahneman argues that when people make decisions that will affect their personal financial situation, they are based on their most immediate emotional reactions, rather than a detached assessment of the long-term outcomes.

Gains and losses are short-term outcomes, and because humans are hardwired to dislike losing, they will subconsciously be biassed towards gains.

This can lead to traders taking bigger risks than they might assume, because they are not giving equal consideration to the potential losses. This behavioural theory is sometimes also referred to as ‘loss aversion bias.’ Some psychologists believe that the pain of losing is twice as intense as the joy we experience from a successful outcome.

This may be an evolutionary trait that lingers from the time when protecting ourselves from losses was more likely to ensure our survival than basking in a victory. For our ancient ancestors, avoiding the intense physical pain of being attacked by a predator, with a possible fatal outcome, is obviously more of a priority than securing a tasty dinner by making a kill.

Some psychologists believe that this behavioural trait is still apparent in our decision making processes today. This can result in cognitive biases towards avoiding losses. We are still socially conditioned to fear losses that may not be physical, but can be economic or emotional.

For example, no one likes to see their football team lose a match, or be rejected in a social situation such as dating. Money is something that we all need not just for survival but also to have some freedom of choice over the way we live our lives, so it is not surprising that it can bring out primal emotions such as fear and greed.

Rather than face up to the prospect of a painful loss, our minds can subconsciously focus on the more pleasurable and positive prospect of making a gain. When it comes to forex trading, this can lead to a tendency to hold on to a losing position for too long in the hope of breaking even, or of selling winning positions too early to lock in gains.

Framing

When faced with a choice that has a 50/50 probability of making a gain or a loss, humans can have a tendency to frame the choice as a potential gain rather than a potential loss. This can prevent an individual from considering all of the available information with equal weight.

Another aspect of Prospect Theory is that it can lead to traders underestimating outcomes with low probability, and overestimating outcomes with high probability. This can lead to traders being caught out by sudden market swings, which is a common occurrence in the volatile forex markets.

Overconfidence

Prospect Theory identifies overconfidence as a common trait in financial traders, and a false sense that they can accurately predict or control events. It is impossible for even the most skilled traders to accurately predict the way the markets will move, and forex trading is all about weighing up probabilities in order to take controlled risks.

When a trader has an illusion that they can control or accurately predict market movements, it can lead to overly risky trades that overlook the prospect of losses and overemphasised potential gains.

Anchoring

Anchoring is another cognitive bias that is known to influence the behaviour of forex traders. It is the human tendency to rely too heavily in the first piece of information available when making a decision. However, this is not always the most objective and impartial information, but it ‘anchors’ in the mind and is used as a yardstick to measure all further sources against.

When forex trading, this can lead to basing all future decisions on the earliest technical analysis or economic data, rather than adapting to the latest available information. Forex traders need to be aware of anchoring bias, and ensure that all of their decisions are made on current market data, rather than taking a mental shortcut to their first impressions.

How can forex traders overcome cognitive biases?

The concepts described above are known as cognitive biases, and are a widely acknowledged issue in the high-stakes world of financial trading. Forex traders may consider themselves to be immune to biassed thinking, but these cognitive processes can be conscious or unconscious.

It is not possible, or even desirable, to completely eliminate all biases because they are deeply embedded in our thought processes. They can help us process a lot of information quickly by building up mental shortcuts, and avoid us having to go through unnecessary steps each time we want to carry out a task.

However, over time we can create selective thought patterns that stop us from considering the whole picture. In forex trading, this can put us at a disadvantage because it can lead to us forming conclusions based on limited or outdated information.

The first line of defence is to acknowledge that you are prone to biases such as those outlined by Prospect Theory. It is not a sign of mental weakness, but a normal and sometimes necessary part of our psychological make up: we are naturally attuned to fear the pain of loss more than the pleasure of success.

Even if you consider yourself a competent and well-informed trader, you should always be on your guard against biassed thinking. The second line of defence is to form a clear trading strategy and align it with your risk management strategy.

When you are making a trading decision, always refer to your plan and be vigilant for any emotional impulses that could be causing you to deviate from it. Another good strategy is to keep a detailed and accurate account of all your trading activities, so that you can periodically review your progress.

This will give you the opportunity to identify any situations where you have been loss averse. For example, are there trades where you have sold earlier than your stipulated price point, because you were anxious to lock in the profit? Would the outcome have been more profitable if you had stuck to your plan or carried out a fresh market analysis?

There may also be examples of trades in a losing position that you have hung on to for too long, rather than bite the bullet and accept the loss. In the majority of cases, this behaviour will probably only have amplified the loss, whereas selling at the limit specified in your trading plan would have minimised it.

When making a trading decision, try not to focus purely on the gains or losses, but objectively weigh up the probable outcomes. Adopt a neutral frame of mind, and avoid short-term thinking.

The key to making steady profits in forex trading is to keep your focus on the bigger picture: it takes new traders several months or even years to become consistently successful, and even then it will be necessary to accept some losses along the way.

Condition yourself to see losses as a sometimes necessary business expense that is part and parcel of the trading process, rather than a sign of personal failure. If you are taken by surprise by a steep loss, step back and process any resulting emotions such as anger, shock, panic, fear, shame, and so on.

It is normal to feel this way occasionally, but the key is to be aware of the emotion and not to act on it. Work out what went wrong, and adjust your risk management strategy accordingly, rather than compound the error with a poorly thought out and subjective action.

Prospect Theory and associated theories such as loss aversion bias can give traders greater insight into the subconscious processes that can influence their decision making.

This can improve their trading outcomes by learning how to recognise when their judgement might be skewed, and adopting suitable risk management strategies to help buffer themselves from the effects of these biases.

Forex trading is an exciting opportunity, with trillions of dollars exchanged on the markets every day. Besides the possibility of making extra money, learning how to trade can expand your outlook on life and even change you for the better as a person. It’s a steep learning curve with great potential rewards.

Before you even begin trading, you can give yourself the best chance for success with the right preparation. Some people might dream about how success will change their lives, whether that may be through extra money or increased power and status.

However, the truth is that you need to be prepared to be successful, rather than sit back and hope that success will change your life. As the saying goes, ‘Success occurs when preparation meets opportunity.’ But what does this mean exactly?

Well, success tends to be elusive to people who lack confidence and self-knowledge, so there is little to be achieved by telling yourself that when you are successful you will become happy and confident. This is the wrong way around; you need to work hard to cultivate that positivity and self confidence in order to attract success in the first place.

Of course, this is easier said than done, and at times it may be a case of winging it and bouncing back from failure. The important point to remember is that all successful people go through this process, sometimes to an extreme and lengthy degree. Behind the story of any famous sportsperson or musician is a tale of hours and hours of practice and preparation.

Sometimes, fate will play a role and even the best laid plans will go astray. This is particularly true in forex trading when even the most seasoned professional can’t be sure 100% of the time which way the markets will turn. However, learning to deal with failure is all part and parcel of becoming a successful forex trader.

How do you define success?

The first step is to define what success means to you. Most people, if they are completely honest, will equate success with making a lot of money, and there is nothing wrong with this goal in itself. Almost all of us would like to live with greater financial security and comfort, with the freedom to travel wherever we please and enjoy the finer things in life.

However, this level of financial success rarely happens when we pursue money for its own sake, particularly in the complex world of forex trading. Therefore it’s important to refine what your goals are, and look beyond the simplistic one of making a lot of money.

This is because the only way to give yourself any chance of making consistent profits in forex trading is to focus on minimising and managing your risk level. When you are purely chasing dollars you will inevitably take your eye off the ball and come a cropper. And how do you best manage risk? You have probably already guessed, it is through preparation.

How to prepare for success

So by now it is clear that the success fairy does not sprinkle you with magic dust at random; you have to take charge of your mindset so that you are in the best position to recognize and take advantage of the opportunities to make consistent profits. These chances are always out there for the taking of the well prepared person.

Prepare a sound trading strategy

Trading strategies are obviously a whole separate topic, and there is plenty of advice out there about how to cultivate a trading strategy that works for you. You should already know your preferred time frame, methodology, and currency pairs, and have practised implementing them with a demo account.

Most of all, you should have a sound risk management strategy in place. These are the checks and balances that will stop you from incurring catastrophic losses and compromising your ability to afford the basics of living. Make sure that you understand what your risk tolerance is, how to use stop losses, and how to safely use leverage.

Underpinning all of this should be a wider level of understanding of the forex markets and the factors that influence them. This includes learning to analyse the economic news for signs of changes to monetary policy, political events, natural disasters and so on. You should know how any geopolitical current affairs will impact the value of your currency pairs.

Mental preparation

The next step is to cultivate the right mindset for forex trading. Think of yourself as a mental athlete who needs to get fit in order to be competitive and stay the course. Your strategy will give you the rules of the road, but you still need to learn how to drive the car in a smooth and efficient manner.

The best place to start is with your pre-trading routine. This helps to set up your day so that you begin in a calm and orderly manner and are ready to deal with the rigours of the day. Some people find that 15 or 20 minutes of exercise is beneficial to help them mentally focus and feel alert and energised.

Other people find that a short meditation routine puts them in the right frame of mind. This involves training your mind to focus on the present moment rather than follow its natural tendency to wander from one thought to another. It can take practice to see the benefits, but many people use it as a way of sharpening their powers of concentration.

Once you are mentally warmed up and in a positive state of mind, work your way through a checklist before beginning to make trades. This might include checking the economic news for any events relevant to your currency pairs, and making any necessary adjustments to your trading strategy.

Emotional management

Forex trading elicits strong and deep seated emotions in even the most laid back personalities. You might more readily associate primal emotions of fear, greed, and loss and their dastardly consequences with Shakespearean tragedies, and that seems a whole world away from the logic driven numbers game of the financial markets.

However, when we are trading as an individual, we are putting our finances on the line, and this is tied in with our ability to pay for life’s essentials. In other words, the primitive survival instincts will come into play, passed down through the centuries from our ancestors when losing really was a matter of life and death.

These emotions can catch out the unwary trader, especially those who think that they are too strong to be affected by them. Everyone makes emotion driven decisions whether consciously or subconsciously, so to try and deny or repress these feelings is very dangerous.

The best traders are aware of their emotional state even at moments of intense pressure. They are not prone to hubris and overconfidence, and yet neither are they timid and overly cautious in their decision making. They deal calmly with failures and never indulge in the temptation to revenge trade.

This requires self-knowledge to overcome any personal traits, such as impatience or impulsiveness. It also demands emotional intelligence and the ability to recognize and step away from a potentially risky situation. A good trader will always refer back to their trading strategy and market research rather than cave into their instincts.

Remember: you do not ‘trust your gut’ ever in forex trading, because this will lead to poor decisions. It’s a game of strategy, not of chasing dollars, which is why it is so dangerous to equate success purely with money. Patience and discipline are the qualities that give the biggest pay-off between risk and reward.

At times, you will feel nervous, excited, frustrated, pressured, confused, and so on when you are trading, because no one can completely shut down their emotions and it isn’t a healthy state of mind in any case. The key is to always learn to step aside even when faced with the unexpected and refer to your trading strategy, and act on objective reasoning only.

Everyone is different, and when it comes to the most effective way to manage your emotions, it may be a case of trial and error. For some, maintaining a good work-life balance with plenty of exercise, a healthy diet, and positive relationships is key. Other people draw on meditation strategies to help them focus and filter out the ‘white noise’ of their emotions.

All this takes time, but if you are determined you will find that your mental resilience and powers of objectivity improve with practice. This will help to set you on the best path to success as a forex trader.

The right environment

One point that can be overlooked is the physical space in which we trade. While trading can be carried out from anywhere with an internet connection, your surroundings can subconsciously influence your mood and behaviour.

If at all possible, have a dedicated zone in your house where you can be completely free from distractions and keep your workspace tidy and well organised.

If you are looking for instant forex funding, please get in touch with us today.

As anyone who is beginning their forex trading journey will know, there is a huge amount of new information to take on board. Developing an understanding of the markets and getting to grips with technical and fundamental analysis is a steep learning curve, and it takes a lot of time, mental focus and commitment. 

This process is essential so that you have a good foundational knowledge of what forex trading is all about and how it works. Understanding the key technical analysis tools and the bearing of geopolitical and economic events on the markets is crucial to putting together a solid trading strategy.

However, no matter how well-informed you are and how carefully you have thought about your trading plan, there’s one very important element that you may not have considered: yourself. If your strategy sets you against your natural personality traits, then you will always be fighting these tendencies and it will impact on your performance as a trader.

To give yourself the best chance of success, it is important to spend some time on self-reflection and identify your core personality traits. This will help you to harness the power of your natural ways of thinking and emotional responses to your advantage, rather than setting them up as continual obstacles to overcome. 

Here are some tips to help you personalise your approach to forex trading, and give you a unique edge that will help your energies and abilities to flow naturally. 

Make an honest appraisal of your personality

If you are not totally honest with yourself about your natural strengths and weaknesses, you will always be jumping from one trading style to another without developing prowess in any. You will struggle to make consistent profits and may even become so discouraged that you decide that forex trading isn’t for you.

However, it’s much more likely that you just haven’t found a trading style that matches your personality. There are a variety of ways you can assess your personality. For example, it is possible to take in-depth psychological and personality tests at an assessment centre or online, although you will need to pay for these and make the time commitment. 

It may be worth investing the time and money if you are interested in a formal and systematic assessment that has been designed by a psychologist. These types of tests are commonly used by large organisations to help them make decisions when hiring staff, to make sure that the candidate is a good fit for the role.

The tests are designed to measure aspects of personality and behaviour such as introversion and extroversion, temperament, motivation and resilience. They can be useful because no matter how well we think we know ourselves, most of us have blind spots or biassed views of ourselves based on outdated information. 

By taking a personality test from a recognised source, such as the famous Myers-Briggs test, you will be able to get a rounded view of your personality that is less subject to your own interpretation. This could be useful if you have limiting beliefs about yourself that were formed in your childhood or youth, or shaped by a negative past relationship. 

The test might help you to recognise strengths that you weren’t fully aware of, and to understand your weaknesses better. A weakness isn’t necessarily something you could or should overcome, it’s just a useful pointer that might suggest you are more suited to one particular trading style over another. 

The personality test can increase your confidence by helping you to better understand where your strengths lie, and to let go of subjective psychological baggage that has been holding you back. There are some free online assessments, although these may be rather generic and superficial in nature, but it may be a good starting point.

If the concept of a personality test does not appeal to you, then spend some time in self-reflection. Ask yourself questions such as whether you enjoy working under pressure, how patient or impulsive you are, your attitude to risk, and whether you have a methodical mind with an eye for detail, or if you prefer to think about the bigger picture. 

It can help to write down your thoughts and feelings rather than just keeping them in your head. Daily journaling can help you to identify patterns of behaviour that you weren’t aware of. 

You may wish to ask the opinion of trusted friends, family members or colleagues. However, they may not be completely honest for fear of causing offence. If on the other hand they do not offer criticism in a constructive manner, it could knock your confidence and upset your relationship with them.

Understand your risk tolerance

Risk tolerance refers to the amount of money you are prepared to lose on each trade. This will depend to a large extent on the amount of capital you can spare without compromising your personal finances. It also depends on your attitude; some people are naturally conservative and cautious, and others are bolder and can handle uncertainty well.

Risk management is a cornerstone of successful forex trading, and it’s strongly linked to emotional intelligence. Read up on trading psychology, which goes beyond personality and explores the reasons why financial trading can elicit powerful emotions, and how they can impact on our trading decisions.

Successful trading requires you to think clearly and objectively, and to step back from subjective and emotion-led decisions. 

Select your trading style

Now you have a better understanding of your personality and your risk tolerance, you can think about what trading style might suit you best. 

Scalping

Scalping is a fast-paced trading style that involves making trades within a few minutes or even seconds of each other. It suits traders with sharp lively minds who thrive on making quick decisions under pressure. It requires energy, focus, and a good balance between confidence and over confidence.  

This trading style may suit people who tend to be impatient but are highly focused and motivated. Because of the fast nature of the trading, it requires a high level of risk tolerance and emotional awareness. Some impulsive people can be driven by their emotions rather than objective thinking, so be aware of this.

Day trading

Day trading involves completing a trade within one day. If you are a highly focused and organised person who doesn’t like to take big risks, then this trading style might suit you. It takes away some of the uncertainty and waiting time of swing trading, but is less pressured than scalping. However, you’ll still need to feel confident with making quick decisions.

Day trading is quite time consuming. Most forex traders do not have 100 per cent of their time to commit to trading and will combine it with another job. Consider whether you are able to fit a whole day of intensive trading into your lifestyle.

Swing trading

Swing trading involves holding a trade over a few days or even weeks. This requires self-discipline and patience, and a phlegmatic personality type who enjoys identifying patterns and is strong-willed enough not to panic when a trade appears to be turning against them. 

Position trading

Position trading involves holding trades open for several weeks, months, or even years. It requires a good understanding of fundamental analysis so that you can keep ahead of market movements and plot the best time to complete your trades. It may suit traders who do not have very much spare time, because day to day you don’t need to do a lot. 

As you can imagine, this style of trading suits people who have the patience to hold the trade through turbulent times without being swayed by geopolitical events or public opinion. It may suit introverted people who are independent thinkers and have an aptitude for fundamental market analysis.  

Be flexible in your approach

Even after a lot of self-reflection and forward planning, it may be impossible to predict which trading style will suit your personality until you have tried out one or two approaches. Remember that your style may evolve as you become more experienced and confident, so stay open minded and flexible.

However, give each style a fair trial and don’t chop and change every time a trade doesn’t go your way. All trading styles have their advantages and disadvantages, and it’s impossible to find a watertight formula that will work for you every time.  

Be aware of your strengths and weaknesses, work on your emotional intelligence and ability to manage risk, and be prepared to learn from others. Above all, make sure that you have a trading style that you enjoy, find rewarding for more than just financial reasons, and fits in with your lifestyle. 

This way you are more likely to build a sustainable forex trading career that will soon be generating a steady income.