How To Have A Growth Mindset For Forex Trading

How To Have A Growth Mindset For Forex Trading

This is a Guest Post by Liam from PriceActioNinja.com.

A professional Forex trader is not identified by having multiple trading screens or highly complex trading strategies.

Instead, what separates winning, professional traders from amateur, losing traders is the mindset they approach trading with and the actions they take to improve and refine their trading performance.

To put it simply, there are a number of things that winning traders do that losing traders fail to do.

Here are the most important…

Winning Traders Are Constantly Learning And Improving Their Trading Skills

Losing traders often go no further than learning the basics of how to trade Forex and then learning a trading strategy or two.

In contrast, winning traders who view themselves as professionals working at an art, a craft, a science, a skill – however you care to characterize trading – are, like other professionals, continually seeking to learn more about trading and about how to improve their trading skills.

The GOAT (Greatest Of All Time)

Michael Jordan is the greatest basketball player ever to play the game. (His statue outside the United Center in Chicago is inscribed, “Best there ever was, best there ever will be”.) But even after being recognized as the greatest player in the game, he continued to work on improving and expanding his skills.

One of the themes of the classic book on stock trading,“Reminiscences of a Stock Operator”, is the growth and improvement of trading legend Jesse Livermore. As you read this fictionalized biography, it’s easy to see him becoming a better and better trader over the years, even though he endures some very harsh and tough times with his trading.

They Find Mentors

Winning traders are self-confident, but not typically guilty of the original sin of “pride”.

They freely admit that they don’t know everything there is to know about trading. And they eagerly look to learn from other traders. In fact, virtually every “market wizard” attributes a part of their success to trading mentors who taught them priceless lessons along the road to becoming a winning trader.

Paradoxically, losing traders often show evidence of a desire to proclaim something like, “I learned everything about trading all on my own. – Nobody else helped me.” Well, if that’s your attitude, consider this: If you’re completely self-taught as a trader, then the guy who taught you everything…didn’t know very much.

One of the most valuable things that a trading mentor can impart to you is the market wisdom that only comes from years and years of trading experience.

Winning Traders Always Keep A Trading Journal

Keeping a trading journal is one of the most common dividing lines between winning and losing traders.

Winning traders always have some kind of journal; losing traders don’t. A trading journal, where you record each and every trade you make, can be a critically important tool in becoming a better trader.

Would you ever think of running a business without keeping any business records? – Of course not. Winning traders keep good records of their trading business.

There are three reasons why losing traders usually fail to keep a trading journal:

  1. – They fail to view trading as a business, instead approaching it like a gambling junket to Las Vegas or Monte Carlo.

 

  1. – They aren’t willing to do the work necessary for becoming a master trader, not even the minimal effort required to keep a trading journal.

 

  1. – The third reason losing traders don’t keep a trading journal is…because they’re losing traders – If they kept a trading journal, they’d be winning traders!

It’s virtually impossible to overestimate the value of keeping a trading journal and reviewing it regularly. A trading journal clearly shows you what you’re doing right or wrong in your trading. Trading journals can reveal things about your trading that you probably never even thought about.

I often tell the story of one trader I know who learned from examining his trading journal that during the same two-hour period of every trading day, he had an extraordinarily high win rate.

He was able to significantly increase his profits just by limiting his trading to this two hour period.

They Practice Good Risk Management

Winning traders are very disciplined when it comes to managing their risk and managing their trading capital, and this is critical to their success.

Discipline – more precisely, self-discipline – and focus are two important traits that become deeply-ingrained habits of winning traders.

Many people view Forex traders as reckless gamblers, but with winning traders the exact opposite is true.

Winning traders practice strict risk management in their trading. You practice risk management by only taking trades where the risk/reward ratio is decidedly in your favor.

A good rule of thumb is to never take a trade that doesn’t offer a potential reward that is at least twice the trade risk. Ideally, you want a trade that offers three, four, or five times more potential profit than risk.

Money management refers to handling your trading account in a way designed to preserve your trading capital. Your trading capital is the lifeblood of your trading business. Without it, you’re out of business.

Probably the number one reason that most bitcoin traders fail is because they aren’t careful about preserving their trading capital.

They over-leverage themselves in trading, trade position sizes that are too large, or have too many positions on at once – and end up blowing out their account, either through one or two huge losses or through a string of losses in a row.

With the leverage that Forex trading offers, it’s very easy to get over-leveraged, to take on too much potential risk at one time. Always have a crystal clear idea of your risk exposure in the market. Keep a running tally of what your account balance would be if you were suddenly stopped out for a loss on every trade you’ve got on.

Because of the need for careful risk and money management, winning trading requires focus.

When winning traders are actively trading, they aren’t also talking on the phone, playing a video game, or watching television. They devote their full attention to the market, so that they don’t miss something that may be essential to trading profitably.

It takes attention and concentration to monitor and accurately analyse rapidly changing market conditions.

Winning Traders Approach Trading With The Proper Mindset

Winning traders have the proper psychological mindset for trading. It’s not a mindset that comes naturally to people, so they train themselves to have it.

For example, Forex trading necessarily involves risk. The only way you can make money is by taking a risk. That’s just a fact of life for professional traders. But taking risks goes against most of what we’ve been taught about the right way to act in life.

In our normal, everyday lives, the axiom is“be careful”, not“take risks”. Winning traders are aware of this, and just that awareness alone makes them better prepared for trading.

Realizing the truth about risk and trading, winning traders are, more easily capable of initiating a trade when most traders are hesitant, too afraid to enter the market for fear of losing. Winning traders have already made peace within themselves about the inherent risk in trading, and so they don’t balk when a trading opportunity arises. They aren’t paralyzed by fear of loss.

Part of the proper trading mindset is having realistic expectations about trading.

Losing traders often believe that all they have to do is find the “perfect” trading strategy and then money will automatically pile up in their account at an incredibly rapid rate. Winning traders know better. They realize, and accept the fact, that no trading strategy is perfect. They realize that some of their trades won’t work, that they will sometimes lose money.

Losing traders tend to get obsessed with trying to predict what the market will do, and then develop the further bad trading habit of refusing to abandon their predictions even when the market is clearly telling them that they’re wrong.

Winning traders trade what they see – they react to what the market is actually doing, not just what they want it to do.

Winning traders know that it’s possible to make a lot of money in trading, even starting out with a small account. But they don’t have the unrealistic expectation that they’re going to open an account with $100 today and parlay that into $100,000 by tomorrow.

With realistic expectations about bitcoin trading, you’re able to practice an important habit of successful traders – patience.

Patience – waiting for a genuinely good trading opportunity instead of impatiently taking an unnecessary risk – is one of the most important traits of a winning trader.

Trading success springs naturally from good trading habits, and good trading habits naturally flow from having the proper psychological mindset.

Conclusion

Winning traders do the things necessary to be a winning trader – the things that distinguish them from losing traders – such as constantly learning more about trading, keeping a trading journal, and practicing solid risk management.

You want to know the secret to becoming a winning, professional trader? – Just start acting like one.

You don’t need a plush office or special computers or ten thousand dollars’ worth of charting software. All you need to get started being a winning trader is the right mindset. Take a look at your trading habits, and determine which of them are appropriate for a professional trader, and which ones you need to replace with better habits.

You can read more of Liam’s work at PriceActioNinja.com.