The primary reason most Forex traders fail is that they ignore the process.
In today’s world of quick-fix solutions, drive-thru menus, and expedient transportation, we want everything NOW. In our “convenient culture” we have come to expect results right away, putting aside the basic principles of cause and effect. “I’ll have a Big Mac, biggy-sized, with 10 milkshakes, and a vanilla latte!” Instantaneously, our ears hear the delightful words “Coming right up!”
Guest post by Casey Stubbs of Winners’ Edge Trading.
When you ask for Forex Trading success, do not expect a “coming right up!” response. Forex Trading is not a get-rich-quick method. If you approach it as one, you will almost inevitably get-poor-quick. Forex Trading involves work, it requires a process. Let us view The Process of Forex Trading together.
Process is defined as: “A series of actions or steps taken to achieve an end.” The first step in the process of becoming successful at Forex Trading is to prepare. The preparation I am referring to is financial preparation, having the financial security to invest money that you can afford to lose.
Do not invest money that you can not afford to lose. Do not invest your last $2,000 in hopes of acquiring some much-needed cash for the bills next month. If you trade with funds that you can not afford to lose, the emotional pressure of trading will become so immense and intense that the likelihood of you losing your funds increases exponentially.
Risking you and your family’s financial welfare is never a wise decision. If you are currently not in the financial position to participate in Forex Trading, establish a goal to be financially secure by this time next year. Therefore, you can be confident in your future investing and you will value that investment substantially more than you would if you had not intently and purposefully worked and planned for it.
Without the foundation of financial security, your “wealth house” is exceedingly vulnerable to the storms of the Forex market.
Winston Churchill said it best; “He who fails to plan is planning to fail”. Having a trading plan is critical to anyone desiring success in Forex trading. Without a plan, any money you do succeed at acquiring, you can expect to succeed at losing very quickly.
Your trading plan consists of your trading vision, goals, and strategy (strategy being your parameters and plans on meeting your goals to accomplish your vision). It is critical to have these three essentials in your Forex trading plan. Your vision will keep you going, even when you fail miserably. Your goals will let you know that you are, or are not, making progress in regards to your vision. The Forex strategy is what you execute to actually see the trading results.
If you exclude any of these three essentials, your plan is ineffectual. A vision without a strategy is a fantasy. A goal without without a vision is insanity (similar to the Fed’s current unlimited Quantitative Easing).
Now it is time to trade! Step one in trading: open a demo account. “Demo!? I want live!” Be patient my friend, this is a process!
It is now time to perfect your plan with demo trading. Demo trading can often be viewed as a toy for amateurs, but it is actually a wonderful Forex trading tool for those serious about developing into successful Forex traders.
In this stage of the process you will realize the faults with your plan and tweak them. You can try different plans and compare results. This stage of demo trading may last for many months, if you are not profitable trading with a demo account, chances are low that you will be profitable over the long-term trading a live account.
Now it is time to trade live. Your long awaited day has arrived. It would be wise to start with a smaller sized account and progress accordingly. You are now consistently trading your “perfected” strategy with discipline. Never feel obligated to enter a trade, but when you do, enter within the boundaries of your Forex trading plan.
One of the most difficult exploits of traders is trading detached from emotions. This is one reason why trading a demo account is so critical. By trading a demo account, you can train yourself to not be ruled by your emotions.
Investors of all kinds are constantly exposed to emotions as they trade, day traders especially. Emotions are good and obviously understandable when it comes to money, but letting them rule your Forex trading is a very dangerous position to be in. You have a choice to make: let your trades be governed by your Forex trading plan or let your trades be governed by fear, greed, and other emotions.
As you perform and execute your trading plan on a live account, you will inevitably find faults. If you notice your plan has stopped succeeding, don’t panic, it’s okay. You can always back up a step to “perfect” your plan further. Consistent, strict adherence to your trading plan ought to always be present in your Forex trading. On the other hand, flexibility is also an essential, understanding that the market is ever-changing.
Being the largest market in the world, the Forex market contains endless opportunities for creating wealth. You are now part of the remnant of profitable Forex traders. As Forex trading functions as a stream of income for you and your family, you are now faced with more choices. Should I add funds to my account? Start a new account? Diversify? Save all the profit? The opportunities are endless, the hard work has paid off, and the price of the process was worth it.
Forex trading is not a sophisticated lottery mechanism nor a get-rich-quick scheme. Please do not let greed lead you into skipping steps in the Forex trading process. Good things are worth waiting for. Persevere through the process. If your Forex trading journey has been disappointing so far, you are not alone. Get your head up, start the process from step one and do it the right way. Let’s make 2013 a year where we follow the process, positioning ourselves for long-term wealth creation.Get the 5 most predictable currency pairs