One of the aspirations of many investors is to graduate into day trading, making money daily from the financial markets. The reality is that only a small percentage of individuals have the mental attributes required to prevail in the forex market. It is the most liquid of all the financial instruments available to trade but also one of the most challenging, with so many variables to consider when buying and selling forex pairs.
Forex markets are not for the faint-hearted. There will be peaks and troughs to negotiate safely, which requires day traders to have strategies and techniques that enable them to think clearer than the majority in the market.
Being a profitable forex trader is by no means an innate skill. Anyone with the determination and drive to succeed can make the grade. Do you have the right ingredients to make consistent profits from the forex market? Below, we explore the DNA of a profitable day trader.
The ability to remove emotion from trades
The most successful forex traders are not emotionally attached to any trade they place in the market. They do not take it to heart if the market goes against their entry positions. They accept the loss and move on to the next potential trade. Losses are part and parcel of trading. If it was an easy pastime, whereby people could post 100% strike rates, everyone would be doing it.
Unafraid to embrace the trading angles of others
Some believe that independence is the key to being a successful forex trader, but that could not be further from the truth. Although it is you who will be the one executing orders into the forex market and managing your positions, there is nothing wrong with listening to other like-minded traders and improving the balance of your opinion on the market.
There is no need to take on the markets like a lone wolf. There is something of a social trading revolution occurring, whereby traders can interact and discuss trades on social network-style platforms. IX Social is one such portal, which connects trading professionals and provides access to CFD forex markets, with the ability to buy and sell positions on forex pairs without owning the underlying asset.
A desire to stick to a trading plan
The discipline to stick to a trading plan is another essential attribute in a consistently profitable forex trader. A trading plan defines your behaviors when active in the market. You should know before entering any order into the market how much you are prepared to risk for the potential profits. This is known as a risk-reward ratio.
Most beginners of forex trading will consider a 1:1 risk-reward ratio for expected gains. For instance, they will set a stop-loss at one unit below their entry position and a take-profit order at one unit above their entry position. Effectively, they only need to have a 50% strike rate to break even in their forex trading at the very least.
Patience to wait for the optimal conditions to trade
Day trading the forex markets requires a lot of sitting on your hands. Some people think that day traders are constantly active in and out of the market, but that could not be further from the truth. The best day traders are those that spend 95% of their time monitoring the markets and understanding market sentiment and 5% of their time opening and closing their positions when the conditions are right to buy or sell a certain forex pair.
No forex day trader is the complete package. Some will have one or two of these traits nailed down but need work on the remaining attributes to stay on the right path to profit. Ultimately, a humble, hard-working attitude to improving the markets is key to long-term profitability.
