How to be a disciplined forex trader with all these obtrusive thoughts that you can’t trade because of being clueless about how this turbulent, hard to understand, and severe financial market engine works and makes others successful thanks to the decisions they’ve made? Let’s take a realistic view of things: not turbulent but volatile, not hard to understand but highly functional, not severe but objective. So what others do differently to reap benefits and make everything that is happening in the market work for their profitability? Understanding your weaknesses is half the battle, trust me.
Trading discipline and patience equals success
From analyzing how the market works to actually closing a position with profit, prioritizing the importance of trading discipline and patience will let you know when to pull the trigger. Discipline stands for impeccable research and data analysis on a continuous basis as the market is changing too dynamically, so staying on top of things to be 100% sure about your market moves is that very same thing you need for profit earning capacity. Here comes technical and fundamental types of analysis to support traders in their market movements.
Technical analysis focuses on the price charts, moving averages, and oscillators as forecasting tools to assess patterns and trends while the fundamental one is more about dealing with external factors that change the market directions – political situation, economic changes, extreme climate events, world news, predictions, and concerns. What type of analysis you need strongly depends on your objectives.
Make your move once the market gives you a green light to do so. Yes, it’s about patience and discipline in forex, it’s about trading that fits your entry criteria, and it’s about doing that at the right time. It’s important to have your exit points with stop losses defined, so you just wait till it meets your wants. What might greatly help you to keep that patient and rational attitude while trading is clearly realizing your risks and take them only when you’re sure that you can afford the loss.
Trading plan elements
Think of a trading plan as your lighthouse, it’s not something optional, it’s a must if you don’t want to find yourself in the middle of nowhere before, in the course of, and after the trading session. The trading plan needs to be written down and analyzed on an ongoing basis. It’s not just about having a trading setup noted, but also money management details, overall trading purpose, and the in-depth analysis of the market should be an integral part of your trading plan. Here are the key elements JustMarkets team would like you to pay attention to:
Skill assessment
Are you confident about yourself as a trader? Have you thought the disciplined trading strategies in forex through and ready to take profits? If it’s a yes, then go for it and win it.
Or maybe you’re a newbie but the one with pretty ambitious trading plans? In this case, a big dream requires small and well calculated steps, so consider using JustMarkets demo account to practice on a real platform with fake money, this is where you’re not losing but learning how not to with real market indicators, updates, and instruments. Think of it as your homework.
Evaluate your performance
Forex trading with discipline means constant growth and boosted trading skills, so you should always draw conclusions from your previous moves to get better.
Your evaluation period is based on the number of trades you’ve closed, not on the period of time. You can experience a 5-month income-generating trading performance and for the next 2 months you might face losses, so it’s always the actual number of trades that count. Defining the optimal number of trades strictly depends on your objectives. Just remember to define the number that is not too low or too high, so you can come to decent and precise assessments.
Trading time
The foreign exchange market is open 24/5 starting at 5 p.m. EST on Sunday and works until 4 p.m. EST on Friday. The best time for trading is when more than one of the four markets are open at the same time. This will heat up the supply and demand zones and thus you’ll observe currency pairs fluctuation. A lot of investors are afraid of such volatile periods in the market, but the reality is the following - higher volatility brings better trading opportunities. Also, active sellings and buyings result in reduced spreads.
Define your trading edge
No matter how long you’ve been trading, identifying your edge is crucial. A trading edge is a set of conditions that bring you to more insightful strategies for trading as it boosts the probability of a trade being a successful one. Being armed with the trading edge helps you to identify when there is a trend in the market and in which case you should conduct trades in the direction of the trend. It has to be pointed out that following edge doesn’t necessarily bring you to a 100% profitable trading scenario, it’s about having higher chances of a winning trade. Once you’ve defined your edge, your focus should be switched to identifying the market language with the help of indicators. Here are just the examples of some trading edges in case you’re struggling to understand how it works in practice:
- enter new positions from 10:45 am to 11:00 am;
- high volume;
- narrow spreads.
Don’t forget about a stop-loss order
This type of order will automatically close a losing position in case the price reaches the predetermined level. No matter how skillful and attentive you are, you still can be distracted by anything and just miss the right time to close your position during volatile trades, so in case of having a stop-loss, there is a guarantee that you won’t lose more. There is also a great part played in risk management when you can define the size of your position.
Know when to exit
While entering a trade, you should always think of your exit. Of course, you’ve got your stop-loss order in case the market dynamic is against you, but what if the price exceeds your intended target and demonstrates the potential to break through the resistance level? You might come to the decision to update your stop-loss or you can just close an order at your intended level and re-enter the position once it, let’s say, breaks through the resistance level. Keep in mind that everything strongly depends on your skills, experience, and knowledge... and yes, market volatility plays a leading role here.
Turn off a non-stop trading mode
We’re all humans. Breaks in trading are essential, because it’s also work and a pretty stressful one. Take a day off to recharge otherwise you risk to lose invaluable trading discipline and patience. Once you feel exhausted, angry, or just not ready for a trading day, don’t ignore this condition, take care of yourself. An opportunity to earn is always around the corner, but it requires your focusing and productivity.
Overcome FOMO
Fear of Missing Out is something you’ve experienced or will experience as a trader. You might always think that there are more successful traders with better opportunities, better trading strategy, and better everything from A to Z. That’s exactly how you end up losing money, because your own strategy, your own experience, knowledge, and feeling is somewhere but not in your head. Fight with the fear of missing opportunities and always be confident in your own strategy which will improve every day judging from your own trading skills and expertise.
Money limit
Money management equals accountability, and once you make it a rule there is a chance that you will propel your trading performance to the next level. The amount of money or in other words the size of your trading capital is based on your profitability, plan and trading execution. There is general advice of not risking more than 1% of your account, a lot of traders find it as the golden mean. The lower the risk, the better, but again everything depends on you and your clear understanding of losing and winning.
The Bottom Line
There is such an adage that says that, if you fail to plan, you plan to fail. I hope you’re the one who totally agrees with it. People with serious intentions and a strong feeling of personal responsibility never fail to follow those meaningful words. Of course, planning, analyzing, learning takes time but how about the result you’re going to face? You’re in charge of every single step in trading.
- Take risks only when you’re sure they’re justified and, more importantly, affordable;
- Think of money as a tool, not a dream;
- Improve your strong points and analyze the weak ones.
Yes, trading isn’t easy, that’s why it’s vital to keep it balanced. The general picture gets ten times more understandable once you prioritize discipline in forex trading, something that will definitely keep you alert and alive. The new day is here, mind the gap.
by , 2021.02.16