A vital characteristic shown in all successful forex live traders is that of discipline. In order to be successful and effective you must learn discipline and how to adhere to certain trading rules. By understanding, accepting and managing these different rules (via trading plans) you will see an increase in profits and reduction in detrimental losses. This article will provide some rules which must be followed in order to be an effective trader.
1. Use a forex live trading plan
The set of rules mentioned in the introduction take form in the trading plan. All experienced traders will agree that working on the foreign exchange market is a great deal simpler when adhering to a sound trading plan. This plan is highly beneficial in that it identifies and explains the trader’s plan of action in the trading market.
While developing a trading plan and strategy can be a tiresome and laborious task, it will be advantageous in the long-run. Due to the internet and advancing technology one is now able to created detailed online plans with specific focus on certain areas of the market. Furthermore one can apply the feature of back testing making these plans more structurally sound than before. For new traders, back testing is a term based in the economic industry. It refers to the application of trading ideas using the analysis of historical data. The data may include reviews of previous trading plans and strategies. By looking through this information a trader can examine his/her own strategy and amend any faults if needs be. He/she could also incorporate any beneficial aspects found in this historic data making the strategy more advantageous when trading.
2. Stay focused on the forex live market
The foreign exchange market is known for being volatile which may leave new traders feeling overwhelmed. It is important to remain focused and not have the busy environment cloud your judgement. Furthermore, emotional reactions should be avoided at all costs. One must realise that all traders experience losses when trading on the forex market with 90% incurring detrimental losses at least once. By accepting this there is a greater chance of profits instead of losses.
Contrary to popular belief, it is not only negative trades that can cause emotional reactions but positive ones as well. Some forex live traders may experience a succession of profits which can create a delusion of grandeur. This may lead to an inflated ego causing the trader to hold onto trades regardless of the movement in belief that it will result in profit. Evidence has shown that when this trader faces an inevitable loss he/she will be victim of a devastating emotional break-down.
In order to avoid any emotional and behavioural difficulties one must identify a means of emotional control. This can be accomplished through realistic goal setting when creating the trading plan. A trader must identify his/her limits and adhere to them.