What Makes a Successful Forex Trader?
This article is the first in a series which will look hard at what makes a forex trader successful. It deals with the taking of responsibility for ones actions and emotions in the market place, including the issue of adherence to our own trading rules.
Successful traders have acquired certain skills and habits that they have finely adapted and tuned to their interactions with the unique environment of the market. Genetics do play a role. For instance spatial thinking skills are an advantage, but that does not mean that someone with poor spatial skills cannot become a successful trader. For what really seems to divide the winners from the losers is to take responsibility for our every action and to possess the ability to be able to recognise, accept and be master of one’s emotions, And this takes training, including, importantly, mental training. For trading is as much a mental as physical activity. Opinions vary (70-90%) but the
importance of the right attitude, belief in success and the control over emotions is paramount.
Being a successful trader is thus first and foremost about taking FULL RESPONSIBILITY for every action, decision taken and emotion expressed in the market place.
When we repeat a particular behaviour over and over again, a neural pathway becomes engrained in the brain. And eventually, that behaviour becomes automatic in that we need to use very little of our conscious mind to execute it. Take the well-quoted example of learning to drive. When we begin to drive, we have to concentrate on every move we make: clutch, accelerator, gear changes. But as we become proficient, we can do all these tasks automatically.
But emotions drive behaviour. An angry driver is a danger on the road. An angry trader can do a lot of damage – but only to himself. This difference alone underlines the uniqueness of the one-sidedness of interactions with the market.
Of course behaviours can be viewed as good and bad, helpful and non-helpful. Successful traders have programmed their brains to execute their trades automatically and consistently, without hesitation and without the influence of destructive emotion. They have done so by learning and repeating those behaviours – driven by positive emotion – that support their goal: to make money. In doing so, those behaviours that worked against them are discontinued and through lack of rehearsal, become obsolete.
It is more difficult and takes longer to ‘undo’ a bad habit and replace it with a good one than to learn the good one from scratch. For instance, someone who has taught himself golf will probably have to ‘unlearn’ many bad swings before his brain is reprogrammed for better ones. The novice golfer however does not have to go through this exasperating procedure if what is learned from the beginning is conducive to success. These principles apply of course to trading as much as to any other learning process.
The trader soon realises – usually to his detriment – that the market is an environment like no other. As such, it demands the more stringent adherence to behaviours and certain emotions than is required of us in our daily lives. Most traders fail in this deceptively simple task and so fail in the market. The market is unlike our daily norm, where everything is played by rules. Other people’s rules. For example, there are driving rules and parking rules. We go to school and if we study well we pass.