In order to be an effective trader on the foreign exchange market one must have an awareness and understanding of the differences in characteristics of successful and unsuccessful traders. The most efficient method to do this is by completing a forex comparison between these two types of individuals.
Goal setting on the foreign exchange market
Whenever you start a new venture you are told to set goals and create a plan to achieve these goals. The only way this can ever work is if you set realistic goals. The successful forex trader will set realistic goals while the unsuccessful trader will not. The goals that the successful trader set are not actually monetary in nature. Successful traders are considered successful because they have a good reward to risk ration and are able to consistently follow their trading plan. The goals you initially set should help you achieve consistency and a profitable reward to risk ratio.
Seeking out aid
Many unsuccessful traders see forex trading as a one man job and do not look at the help they can get. The successful trader knows that they are trading alone and only they can make trading decisions, but they are willing to use help. The help that they use varies from forex signals to expert insight. When the successful trader looks at expert insight they see it as a starting point for their own analysis.
Understanding the different trading tools
There are a lot of trading tools on the market and both types of traders use them. However, the big difference is the level of understanding that the trader has of their tools. The unsuccessful trader may use a tool because they were told it can help them. They will also look at certain things with the tool and not understand the rest. The successful trader will know all about the tool they are going to use. If they are using moving averages then they know the indicator points and what the rest of the average means. The unsuccessful trader will only know how to identify a point without understanding how the point was made.
A trader’s risk tolerance
All new traders are told that they should not be too risky. While this is something that all successful traders keep in mind they know that it does not relate to being overly cautious. The constant fluctuations in the market create unique opportunities for traders to make a profit. The successful trader will take these opportunities when they present. However, the unsuccessful trader will often wait too long and miss the opportunity in the name of caution.
Herd trading is a strategy that a lot of people use to make a profit. However, you should be careful when you simply follow the crowd. The successful trader will know what the crowd is doing, but they will also complete their own analysis to determine if this is the way they should be trading. The unsuccessful trader will not do this and simply moves with the crowd. The problem with doing this is that you do not know when to close a position.