The successful trader is an appropriately educated, disciplined and self-controlled individual whose expertise in the field of Foreign Market Exchange has led to true mastery of trading skills. Successful trading is much like a building: strong structure along with good planning will ensure durability. To secure success, a trader must take the proper steps before diving into action.
The “Holy Market” and its “Commandments”
Trading is an opportunity to make money and a chance for self-fulfillment. The successful trader realizes this opportunity and understand the “commandments” which lead to it and follow them at all times. Among these commandments is having clear goals to guide the trader’s investment strategy and make sure his personal finances are in order. He always analyze and implement his strategy properly, and when he starts trading, he doesn’t over-analyze or over-trade.
Market treats all traders equally
Despite successful trading, the trader always remains realistic regarding his trading performance and always provides honest guidance or advise to fellow traders.
Preparing a plan
The key to successful trading is good planning. A good trader is a person who knows exactly what he is looking for. He will put in the time and effort required to research and develop plans that encompass short- and long-term goals.
Good planning is practically establishing a list of steps required for a successful trading day. To achieve that, the first step is to review the trading journal of the previous day to prepare for the next trade. The second step is to perform the fundamental analysis to find out which currency pairs to follow. The third is to analyze charts technically to determine points of entry and exit, and finally, setting up his risk and return levels to limit greed and fear once the trade is executed. Having a good plan is essential to trading.
Develop your trading sense
Having the skills to trade is an advantage for any trader, but such skills can take years of practice to develop. Most traders refer to the skill of spotting trade set ups at the right moment during favorable market conditions as the 6th sense.
This 6th sense rely on both precise analysis and required knowledge to recognize opportunities of price moves in the market. Any trader can develop this sense by rigidly following the basics of Forex trading, such as the principle of risk and reward, trading patterns and Japanese candlestick analysis.
Good traders are intensely self-aware. They work hard to be successful and even harder to remain profitable. They know their limitations and focus on them by investing their energy in limiting and controlling their risk. It’s a test of one’s capacities.
A successful trader is a disciplined trader; preparing enough to achieve the most out of a trading set up. Using the required fundamental and technical analysis, he will build a plan that will guide him in interpreting price movements, translating the technical indicators, and identifying the ideal trading positions. He chooses an appropriate stop loss point which marks the amount of acceptable risk; he never allows more than the efficient amount of risk. He does not exaggerate in his expectations of success and he always sticks to his plan.
Detach from the need of money
Successful traders take trading seriously, and they focus on getting the most out of the market in accordance with their plan. Professional traders do not over trade nor are motivated by financial reward. They don’t allow emotions like greed, fear, hope and regret overtake them; the desire to hold on to a position, regardless of profit or loss, can be catastrophic.
Stand strong like a rock
The successful trader must stick to the rules of his strategy at all times. Consistently profitable traders have an unshakable trading system regardless of the market conditions. To achieve that, a trader must follow a strategy that is comfortable for him. The strategy must be with realistic expectations; affordable risk and a clear goals.
Adapt to change
In the constantly changing Forex environment, the trader must be flexible. If the market throws something unexpected at him, the trader should be able to analyze it and take action quickly. Also, the very best traders are always eager to learn and improve their skills to keep up with the continuous change in the Forex market and technology. A trader should be flexible enough to cope with the technological advances.
Success in the Forex market demands a non-stop learning process during which traders will come to understand the volatility of the market and gain the expertise needed to make profits.
Good decision-making skills
The successful trader must possess excellent decision-making skills. The primary difference between the professional Forex trader and the beginner is that the first knows exactly when to enter the market. Once the trader finds a trading setup that fits into his strategy, he should takes advantage of it and respect the rules of his plan and strategy.
The successful trader is also independent in their decision making. This prevents confusion caused by opinions of others and guarantees accurate implementation of the trading strategy.
The successful trader
George Soros is an excellent example of a successful trader. He gained international recognition when he toppled the Bank of England on September 16, 1992, a day that is preserved in history as “Black Wednesday”. He was given the nickname “the man who broke the Bank of England” because Britain was then forced to abandon the Exchange Rate Mechanism aimed at fixing the pound’s rate to the Deutschmark. Soros risked $10 billion and generated $1 billion in profit in a single day.
“The money that I made on this particular transaction would be estimated at about $1 billion. I simply used the forward market; I borrowed the sterling and sold it at a high price, then I bought it back again when the loan expires at a lower price”. (Soros, 1992)
George Soros was also accused of triggering the Asian financial crisis by selling the Thai Baht and Malaysian Riggit short in 1997. Thailand proactively spent almost $7 billion to protect the baht against speculators and finally asked the International Monetary Fund for its help. In The Crisis of Global Capitalism: Open Society Endangered, Soros (1998) responded, “The Prime Minister Mahatir of Malaysia accused me of causing the crisis, a wholly unfounded accusation. I wasn’t among sellers of the currency during or several months before the crisis; on the contrary, I was buying Ringgits to realize profits on earlier speculation”. However, during the crisis Soros made more than $790 million. “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong”, he summarizes.
The 3rd most notorious trade that Soros ever made came in 2012, when he recognized the possibility of the Yen depreciating in value after the damage Japan’s economy had suffered during the devastating tsunami of 2011. Sure enough, the Yen did indeed weaken, and when it did, many speculators opened USD/JPY positions expecting the value of the Dollar to rise against the Yen. On this trade, Soros made $1.4 billion.
The main technique of Soros and other top-notch traders is to spot upcoming vulnerabilities in a country’s economy and trade the currency before it falls. Vulnerable countries try to buy up their currency when people sell the currency themselves. These countries do so in an effort to artificially sustain the exchange rate. However, this artificial balance is very sensitive, and when the country cannot fight market forces any longer, the balance collapses. This is exactly what happened in Soros cases.
As Soros demonstrates, a threat for a country can turn into a profound opportunity for traders who are alert and prepared to act. Soros is an example of a successful trader who used his disciplined mindset, an analytical approach, and follow all market commandments to become a successful currency trader. He both masterfully and calmly conducted his strategy in each of the three incidents mentioned above and demonstrated a combination of patience with discipline to identify the perfect time to execute his trades.