Thinking And Trading Like A Professional Forex Trader
There are two primary types of professional Forex traders in the market. The first type is the professional retail FX trader, who typically trades for his own account or may have an arrangement with a proprietary trading firm. The second type is the professional institutional FX trader, who is employed by and trades on behalf of an institution such as a bank or hedge fund. In this article, we will focus on helping you to better understand what it takes to excel as a professional retail FX trader.
What Is A Professional Forex Trader?
A retail professional Forex trader engages in the foreign exchange market as a speculator for the purpose of making a profit from their trading activity. This www.grahakcunningham.com site can participate in either the spot Forex market, currency futures market, currency options market or currency ETF market. As you can imagine, most tend to be attracted to the spot Forex market because of the depth of that market, and the relatively high liquidity within it. After the Forex spot market, the second most popular place for professional currency traders is the futures market.
For the most part, professional Forex traders consider their trading activities as their primary income source. And the trading activities can come in many forms including ultra short-term scalping, shorter-term daytrading, intermediate-term swing trading, or longer-term position trading. Unlike many other types of work or business activities, the amount of time spent on trading often has little correlation to the amount of money that can be earned from it. This is a characteristic that draws in many aspiring traders to the foreign exchange market.
Unlike many amateur Forex traders, who generally tend to treat their trading activities as a hobby rather than as a business, professional Forex traders will have a very specific trading plan that they follow. This includes outlining the various steps and routines around their market analysis and trade execution.
If there is one thing that sets a professional trader apart from most amateur traders, it is that most professionals will tend to be overly obsessed with risk containment at all times, as opposed to amateur traders who tend to be overly obsessed with profit maximization. Professional traders have learned that the most important aspect of trading is not the return on one’s capital, but rather the return of one’s capital that is paramount. In other words, if you are able to take care of your downside risk, then you can survive long enough to enjoy future profits.
Become A Professional Forex Trader
As with most things in life, if you aspire to do something, you should put your full efforts behind it. And this is no different when it comes to becoming a professional Forex trader. To start with, you need to get as much education as you can about how the currency markets work, and the different analytical techniques used for market analysis.
This education can come in the form of reading industry-leading blogs, and subscribing to relevant newsletters from experienced traders. Generally, this will be free of any cost, and should get you started in getting a better feel for the Forex market. Based on this you can decide whether or not FX trading aligns with your personal goals.
After Netgen Skeptic has done some preliminary research in this area, then you need to fine-tune your learning process. In other words, at some point you have to commit to learning more about certain market analysis techniques to help you make the right trading decisions in the market. Some traders will lean towards fundamental analysis, while others will be more interested in technical analysis. Within each of these two categories, you will find many subsets of market analysis techniques.
For example within the technical analysis field, traders can choose from techniques such as order flow analysis, Elliott wave and Fibonacci analysis, price action and candlestick analysis, and chart pattern analysis to name just a few. Once you’ve taken a few in-depth courses in the area that you find the most interest in, then you may consider getting some personalized coaching from an expert in that area to help advance your understanding.
Although premium trading courses, and personalized coaching do come at a cost, it is often well worth it if you have the right mentor to guide you along the way. They can often help you accelerate your learning curve and journey to reaching consistency in the market.
When you have a trading methodology that you’re comfortable with, then you need to thoroughly test that strategy. If the variables within your strategies are more mathematically based, then you may be able to use a back testing software to perform the historical test. If however, your methodology is discretionary based, then you may need to perform your back test manually.
In either case, it’s imperative that you perform the proper due diligence on the strategy, so that you can become comfortable with the performance metrics. Only if you are thoroughly comfortable with your strategy will you be able to stick with it during losing streaks and drawdown periods.
How Pro FX Traders Think And Act
In addition to gaining expertise in market analysis techniques, aspiring Forex traders also need to acquire the proper mindset required for successful trading. Below are some of the important traits that many professional Forex traders share.
Embrace Uncertainty – It’s often said that the only thing certain in the markets is uncertainty. Professional Forex traders know this to be true. Anything can happen in the market, and often does. Many individuals have a tendency to want to control everything around them. This personality trait can be counter productive when it comes to the markets. Successful FX traders know how to thrive in uncertain market conditions. They have learned that trading is a game of probabilities, and that the best he or she can hope for is to try to stack those odds in their favor whenever possible.
Maintain Risk Control – There are a countless number of risks associated with Forex Trading. This includes risk of adverse price movements caused by any number of economic or geopolitical events. Additionally there is infrastructure risk that relates to your particular trading platform or software. In addition, Forex traders can face correlation risk, meaning that their portfolio can succumb to overconcentration of a currency class. This is just a few of the common risks that FX traders face and need to manage on a continual basis. Professional Forex traders spend much more time evaluating potential risks, and putting in mechanisms for minimizing such risks, than they do thinking about potential profits.
Act In A Disciplined Manner – Amateurs are often driven by emotions in the market. This is seen as greed during a winning streak, or fear during a losing streak. These traders have a difficult time with balancing their emotions because they fall victim to the constant ups and downs, not much unlike the feeling of riding a roller coaster. Most Pro Forex traders on the other hand rarely become ecstatic after a winning streak. At the same time, they will rarely beat themselves up over a series of losing trades. They understand the need to maintain discipline in the markets. And this starts with mastering how to control one’s own emotion.
Never Obsess Over A Trade – Professional traders have usually done rigorous testing on their trading strategy. As such, they are very well familiar with the most important trading metrics for their system. For example, over a series of trades, they will know what their expected winning rate is, the average win to average loss amount, the largest drawdown, consecutive winners and losers, profit factor, and more. Because they have an intimate understanding of the key components of their trading strategy, and the historical metrics, they will not need to obsess over any single trade. They know that their success lies in playing out their specific edge in the market over a long series of trades.