In Forex trading we are sold this dream that we’ll be able to make millions of dollars in no time. All we have to do is buy this system or that strategy. It’s as simple as that, no hard work required.
Having been I this business for the last 7 years, I’ve learnt that this is the furthest thing from the truth. Forex, like any other endeavor, requires work and dedication. To be successful in Forex trading we need something more than just an easy system or fancy technical strategy. Succeeding in this business requires grit.
Let’s continue with the lessons from the book “The War of Art” by Stephen Pressfield . In his book he says that a professional is committed over the long haul. He views his endeavor as a journey and makes decisions in view of the longer timeframe rather than the here and now. He may face challenges and obstacles along the way but doesn’t give up. A professional treats it as a marathon not a sprint. And this takes perseverance.
Here are 3 steps you can take to be successful in this wonderful journey of trading:
1. Learn the broader market context
When trading Forex, we don’t trade in a vacuum. We are impacted by other market drivers like fundamental news, monetary policies of the various economies, other market participants and also other markets like the equities, commodities, bond markets etc. It is, therefore, important that we understand these external factors affecting price behavior in Forex.
I recommend doing a top down market analysis every morning before you trade so that you’re fully prepared for the trading day. This analysis should include Fundamental analysis and looking at other markets. You can look at www.bloomberg.com or www.reuters.com to get familiar with Fundamental and market news. Forex Factory (www.forexfactory.com) is a good site that a lot of traders use to check on the Economic News for the day. You can also use your Broker’s economic calendar to get this information. Also, look at your Broker’s news feed for any other pertinent information that may impact price like Option expiries and large order flows coming into the market.
2. Build an arsenal of trade ideas
Many traders get too caught up in the idea that one strategy is THE best strategy and everything else is useless. That is the wrong mindset. For example, you wouldn’t expect to drive the same way under all road conditions. While you may be able to speed on the highway with the light traffic on the weekend, you wouldn’t be able to do the same in a busy metropolitan on a busy weekday. The mix of taxis, cars and hoard of pedestrians would make you keep your foot close to the brakes at all times unless you’re willing to get into an accident.
Similarly, we cannot depend on just one trading strategy or setup and expect it to work all the time. Market behavior can vary depending on the time of the day, month and year. The amount of volatility in the markets can produce big moves at times while the market may consolidate for a long period of time looking for a catalyst to move the price outside the range. If we just have one strategy, say trend trading, we’d not be able to participate in the market. Therefore, it’s best to learn a few trade setups so that you can pull out for the appropriate market conditions. The two critical ones to have in your toolbox are a range trading strategy and a trend following system. A combination of these two will provide you an opportunity to get involved in most of the moves.
3. Take the time to learn price action
Sometimes, we as traders want to take the easy way out and learn just the indicators. We believe that we can just watch the indicators and get into good trades. The problem with this thinking is that most of the indicators are lagging not leading indicators. They can tell us where price has been not where the price is likely to go next.
To be a Pro, one must also understand the price behavior. The speed and the intensity of the price move, for example, can tell you a story that indicators won’t be able to. Therefore, to be truly successful in forex trading one must get intimate with price. It does take longer. However, it will pay off over the long haul.
So are you ready to turn Pro? Leave a comment below and let me know.