In this guide, we will talk about how to develop a trader’s mindset. Before we get into learning about forex trading you need to understand the psychology that goes into becoming a profitable trader. Trading is not easy, as with everything that is worthwhile.
Be Emotionally Disciplined and Have A Plan
For a trader, emotional discipline and consistency are key. Depending on your trading style you have to be consistent. The following are a few tips to be consistent with trading.
Have a Set time Every day that you Trade
If you have a full-time job, you can trade before your work or after you finish work. Remember to keep it consistent, if you choose to trade before your work stick to that routine. Another tip for traders who have full-time jobs is to do swing trading.
Swing trading is a trading style where you hold a trade for days or weeks. This way you don’t necessarily have to trade every single day but you will need to check up on your trades every day. With this trading style, you will only have to take 1-3 trades a week and you only need 30 minutes per day.
Have a Trading Plan & Goals
Another important thing is to have a trading plan. Always stick to your trading plan no matter what. Yes, you can improve your trading plan but do it one step at a time. Don’t try to change too many things at once. It’s all about executing this plan day in and day out and being patient with it.
Before getting started, you need to have a goal. Make sure that you have a clear goal and then you can break it down. Let’s say you want to grow your trading account to $12,000 by the end of the year. That means you need to grow your account by $1000 per month and $250 per week.
It is important to focus on growing the money in your account and don’t take any money out of your account. This way you will be re-investing your profits which will make your account balance larger. If you have a bigger account balance, with each profitable trade you make you will make a larger profit.
Keep a Trading Journal
Always keep a journal. Having a trading journal helps you to track your trades. This way, you will be able to reflect on your trades and make proper trading decisions. In your trading journal, make sure to put comments on why you entered the trade and why you decided to exit the trade.
If you are interested in getting a trading journal make sure to check out our trading journal. It is completely free to use (It is on google sheets)
How to Actually be Profitable in Trading
It is important to note that every trade will not be profitable. There are two main ways to be profitable with trading. One is to have a high win rate and the other is to make your winning trades larger than your losing trades.
With the first method, you need to have a good winning rate which is harder to do than with the second method. But the benefit of the first method is that you can have a risk-to-reward ratio of 1:1. But this is not the recommended way to make profits in the forex market.
With the second method, your win rate doesn’t matter as long as you keep your winning trades large. For this method, you need at least a 1:2 risk-to-reward ratio. We recommend you have at least a 1:3 risk-to-reward ratio.
Jack of All Trades vs Master of One
If you want major success in forex trading you have to be a master of one. First, you need to master 1 strategy or a maximum of 2 strategies that complement each other. Also, focus on trading forex and don’t trade other financial instruments like stocks and options. Make forex your masterpiece.
Things take time, so be extremely patient and keep improving your trading skills. Over time you will be able to understand the markets very well and you will become a very profitable trader.
Also, it is very important that you have your own trading rules. That includes what not to do as well. Make sure to stick to the rules and fine-tune them over time.
How much time do you need to spend on Forex Trading?
When it comes to trading, you do not need to spend a lot of hours every single day. We recommend you commit at least 1 hour per day, 5 days a week to trading. That’s only 5 hours a week to achieve your financial goals with trading. Now, if you are swing trading, you can actually spend less time every day.
Simply, during the hours you trade, you need to analyze the charts of currency pairs that you want to trade and look for trade entry points and exit points. Also, we recommend you time block a couple of hours per week to backtest your strategy which we will discuss in a later section.
Make Trading a Habit
When something becomes a habit you don’t have to have the motivation to do it. So, set a time every day for forex trading. We recommend you set at least 1 hour for trading. Minimum of 30 minutes to check the markets and 30 minutes for backtesting.
Be consistent with it and you will become a successful trader. And if you continue this for at least 90 days, you will be a more proficient trader.
Conclusion
In conclusion, remember to go through the guide carefully and learn all the concepts. Mindset is as important if not more important than learning technical analysis skills.
This guide contains all the knowledge that is required for you to become a profitable trader and make a living out of trading. In the next lesson, we will look at important forex trading terms that you must know in order to become a successful trader.