How forex traders make money
For an amateur trader to progress it is important to study what the professional Forex traders are doing. In the article I outline the main 10 reasons why pro Forex traders make money consistently in the markets. Trade the market like a professional Forex trader, learn what they do and why they do it and see for yourself how you can achieve their level of success.
Below are my 10 Reasons Why Pro Forex Traders Make Money And How You Can Do It To.
1. Pro Forex Traders See The Chart For What It Is, Not What They Want It To Be.
Amateur traders get over-involved in forecasting what will happen next on the charts. Predicting long term market movements is not only an unrealistic method of trading but also the incorrect focus. Many things in the markets are out of your control and therefore the focus must be on what is currently happening on the chart and not what you think will happen next or what you want to happen next.
Professional Forex traders focus on the present information on the chart. The easiest way to do this is to forget any open trades that you have running, remove the emotion and look only at market direction and potential new set ups. Use rules or approaches such as looking at price cyclicity and price action. Follow you rules, and only when your rules give you signals can you trade.
2. Professional Traders Keep It Simple And Follow Price Action First.
Pro Forex traders believe in quality over quantity. They do not overwhelm themselves and their charts with contradicting signals. Their focus is only on the best and the highest probability setups. The greatest trades should jump off the chart and slap you across the face, professional traders understand that too many indicators hide those trades and make things more complex. Their decision making process is primarily based off price action, cyclicity and support and resistance. It might not be fancy but it’s proven to work.
3. Expert Traders Don’t Spend All Day Analyzing The Markets.
Advanced traders understand less is more. Many amateur traders make the mistake in thinking the more time spent the more money can be made. This is risky as you’re overwhelming your mind and charts with so much information it all begins to conflict itself. Secondly, it prevents you from trading only the highest probability setups as the more time spent the more trades you will want to place. Step one, is to clear your charts and chose maximum 10 currency pairs. You can and should comfortably analyze the markets and place trades in less than 20-30 minutes a day. Your brain can only focus at a high level for that long, and after that time, your mind simply isn’t as focused as it should be; which isn’t the best way to manage your money. Expert traders understand the greatest trades shout out at you from the charts. Try limiting yourself to 30 minutes a day, and see how you’re trading develops.
4. Pro Traders Are Practical.
Professional Forex traders focus on what they are prepared to lose not what they stand to gain. They have reasonable targets for account growth as they are disciplined and always risk manage. Pro traders understand that drawdown periods must be considered and they aim for low drawdowns in order to stay in the game, they allow their profits to grow and compound over time. Expert traders know that yes, trading can be highly rewarding but it is not a get rich quick scheme.
Compare the above mindset to your amateur trader who is looking to make as much money as possible as fast as possible, and you can see that a pro trader has a much more level-headed approach, whereas an amateur has a ‘get rich quick’ mentality. Trading sensibly ensure you only take the best opportunities, you risk manage and you have patience to allow time and compounding to grow an account. That amateur approach leads to over-trading, losing money and a very disgruntle person. The professional approach leads to consistent profits.
Be reasonable and set practical goals. You’re not going to start living off your Forex trading next month if you’re trading a $2,000 account. Focus on growing your capital to a sensible level where you can draw money each month, and still allow your account to grow.
5. Professionals Use Their Minds, Not The ‘Sexy’ ‘Guaranteed’ Expert Advisers Or Robots.
As the old saying goes ‘if it seems too good to be true, it probably is’. Professional traders do not fall victim to the over-promised and under delivered expert advisers or robots. Professional traders are not looking for the ‘holy grail’ or ‘next big thing’. Experienced traders know that these promises are very unlikely to work long-term, if they even work in the first place, and hold no value in them. Pro traders grow their account by using their mind, their skills and their abilities. For the foreseeable future, no computer program for $27 will be able to beat a professional trader mindset. The big banks may be able to get automated systems to work for them for periods of time, but they have a lot of experienced people watching these robots all day long, with PhD’s in complex subjects the rest of us didn’t even know existed. They have the money, manpower and the infrastructure to deal directly with the major banks, funds and liquidity providers on a level you can only dream of. As you can guess, it costs much more than $27.
6. Professional Forex Traders Don’t Listen To Others
Nobody cares more about your money then you do. Pro Traders follow their trading strategies rules and not the opinion of others. They don’t risk their money based on what an expert ‘analyst’ has just told millions of people. Most analysts aren’t even traders; they have opinions but don’t put their own money on the line for it. If their opinion is incorrect they won’t lose money, but you can. You’ll find no shortage of opposing ‘expert’ opinions, which can make things overly complicated. First step, learn trading strategies with proven results and write your own trading plan and place your trades based on rules not opinions.
7. Professional Traders Concentrate On Technical Analysis First, News Events Last.
Expert traders use technical analysis as their most important method of market analysis. Technical analysis will give you areas on the chart where you can buy and sell with confidence. This is due to repeating patterns and support and resistance levels in the markets. Unlike news events which are difficult to trade profitably because of larger transaction costs and volatile whipsaws because of large volumes of banks and funds entering the market in a very short space of time. A professional trader should know what setups they are looking for without fundamental factors. The price action usually has the news release priced into it in advance.
8. Experts Traders Do Not Over Trade. They Can Walk Away From The Screen.
Amateur traders often struggle to tear themselves away from the charts. Whereas, pro traders understand they can only control their own behavior not the markets. Watching the price move up and down all day and night long is a dangerous and tiresome way to trade. Pro traders do their business and walk away; they trust their strategies and rules.
A great way to train yourself to walk away is by setting an alarm 30 minutes from when you sit down to trade. Ensure the alarm is put in another room so you must get up to turn it off. Get up and walk away from the charts. The best perk of trading is it can be done in 30 minutes a day so that you can go and do the things you love so take advantage of this benefit and enjoy some hobbies.
9. Pro Forex Traders Have A Discretionary Trading Sense.
Humans have the capability to be greater traders than computers because humans have the capability to use ‘discretion’. Through education, time and experience with trading the market you can develop your own trading discretion. Price action trading is rules based, yet open for discretion. Pro traders use high probability trade setups with multiple confirmations that add further substance to the price action setup. Signals will make it ‘look’ right and your discretion will make it ‘feel’ right. Through education, time and experience your discretion will advance and you will be able to use this to know which trades to take and which ones you allow to go by.
10. Experienced Forex Traders Use Straightforward Trading Systems.
The most difficult thing to get my new students to initially accept is that trading is not complex. Learning how to trade does not require an advanced specially made indicator, vastly complex mathematical equations or fancy charts. Amateur traders are often surprised to learn most professional traders simply use only a few trading strategies on some currency pairs on higher timeframes or as I like to say it: K.I.S.S a keep it stupidly simple trading approach.
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