If you’re interested in trading forex, you might have heard that the majority of traders who enter the market lose money. It’s a pretty daunting statistic, and it’s one that’s often used to discourage newbies from even bothering to try their hand at currency trading.
However, this statistic is quite misleading. Yes, indeed, many traders do not make consistent profits over the long term. But this doesn’t mean that it’s impossible to make money from forex trading.
Many traders consistently profit from forex trading month after month, year after year. These are the so-called ‘consistent’ traders. And while they may only make up a small percentage of the overall trading population, they are the ones who ultimately make all the money in forex.
Reasons why consistent traders are successful
There are a few reasons why the most successful traders areoften just, in fact, the most consistent ones:
Consistent traders have a solid trading strategy
The first and most important reason why only consistent traders persist in the long run is that they have a solid trading strategy. A strategy is a set of rules or guidelines that dictate when and how to enter and exit trades.
A good trading strategy will consider risk management, entry and exit criteria, and position sizing. It will also be based on sound market analysis techniques, such as technical or fundamental analysis.
Most importantly, a good trading strategy will be profitable over the long term, separating successful traders from those who ultimately fail.
Consistent traders stick to their trading strategy
Once a trader has developed a profitable strategy, they must stick to it, sounding like common sense. Still, you’d be surprised how many traders abandon their winning strategies favouring new and unproven ones.
Even the best trading strategy in the world won’t make you money if you don’t stick to it, and this is why so many traders ultimately fail; they can’t stick to their strategies for more than a few weeks or months before they start deviating from them.
Consistent traders are disciplined
To stick to their trading strategy, a trader needs to be disciplined, which means being able to control your emotions and don’t let them get the best of you.
It’s human nature to feel greed when you’re making money and fear when you’re losing money. However, successful traders can control these emotions and make decisions based on logic and reason, not emotion.
The emotional factor is probably the most challenging part of trading for most people. It takes a lot of practice and experience to control your emotions while trading. But once you’ve mastered this skill, it will be one of your most significant assets as a trader.
Consistent traders manage their risk
Risk management is another critical aspect of trading that separates the winners from the losers. Simply put, risk management is managing your risk exposure.
It means setting things like stopping losses and taking profits at predetermined levels. It also means not risking more than a certain percentage of your account on any given trade.
There are different ways to manage risk, but it is essential to ensure that you’re doing it consistently with your overall trading strategy.
Consistent traders are patient
Patience is another essential virtue for successful traders, and this doesn’t mean sitting in front of your computer all day waiting for the perfect trade to come along. Instead, it means being willing to wait for the right opportunities and being patient enough to let your trades play out.
Many new traders get impatient and close their trades out too early, which is often a result of fear or greed. But successful traders know that they need to be patient to make big profits.
The bottom line
If you strive to be a financially successful trader, you need to develop a solid trading strategy and stick to it. You also need to be disciplined and manage your risk correctly. Finally, always use a reputable and experienced online broker such as Saxo markets, and you’ll be on your way to becoming a successful trader.