3 Key Ingredients for Forex Trading Success: Technique, Psychology & Software

Achieving success through Forex Trading is very difficult. It's an unpleasant truth, but a truth nonetheless. Everyone who embarks on this activity experiences it, especially from the initial stages. However, difficult does not mean impossible, far from it. If you adopt certain measures, if you put in effort, if you are willing to question your beliefs when the market says no, then success is a real prospect. Among the "generic" but equally important measures that a trader can and must adopt, the awareness that Forex Trading (like any other speculative investment activity) is dominated by three elements in particular stands out. Three real levers, which if maneuvered intelligently, open the doors to economic and personal satisfaction. Technique, Psychology, and Software. These are the three ingredients that must never be lacking in a trader's activity. In the following article, we will discuss them in a detailed and in-depth manner, trying to give some advice to those who are still trying to find their way in Forex Trading.

Forex Trading is a technical matter

There can be no doubt that Forex Trading is a substantially technical and specialized activity. It's a truth even based on the collective imagination, which generally camps out false and absurd myths, misunderstandings, etc. It can also be inferred by taking a look at the basic tools of each trader, such as charts. However, Forex Trading is "technical" for many other reasons, perhaps even more important and decisive for the fate of the individual trader. One of these reasons lies in the complexity of the market. It is often illegible, poorly interpretable, especially for laymen and beginners (but it could apply to everyone). However, it is endowed with its own structure, its own dynamics. It is precisely this that dictates the need for technical knowledge. A trader well integrated into the technical issue, and therefore in possession of a powerful or at least sufficient baggage, knows these dynamics, recognizes them when they manifest, tries to exploit them or at least defend themselves from them. But there's more. Forex trading, from a certain point of view, is science. It is not a science "in general", that is, an entity in which phenomena are repeated always and in any case according to a scheme. Rather, it is the science of probabilities. It's statistics. Certainly, no one knows the price that the euro-dollar will reach in the next two months. However, with a little effort and an adequate set of skills, the trader can say whether it is more likely that the price will rise or fall. It all depends on the analysis. This is the only element that, starting from an intelligent collection of data and their processing using specific models, enjoys a certain predictive value. In this case, we are clearly talking about technical analysis. The technical element, however, is not exhausted in technical analysis, although the lexicon may create some misunderstanding. A technical trader, and therefore with sufficient skills, is also able to read the economic environment, everything that happens outside the exchanges and which is therefore not reported - if not in a very indirect way - by the graph. It is not a small skill: the external environment significantly influences prices and the trend of trading. In some cases, this influence is radical and dramatic. It happens, for example, when unexpected news is published, which catches traders by surprise. In that case, the market reacts and does so violently, regardless of the evidence recorded up to that point by the raw numerical data. To satisfy the "technical need", the trader must follow a rather difficult path. Of course, each individual has his own history, his own educational background, his own inclinations, but a more or less heavy effort is required of everyone. In simple terms, before investing money, before starting Forex Trading, it is necessary to study. Theoretically, it is possible to start from the basics and become, within a few weeks or months, a full-fledged trader, although still lacking experience. The training path must be developed through a variety of educational materials. Not only books, therefore, but also webinars, online courses, videos, even blogs and forums. Nothing should be overlooked. Obviously, practice should not be overlooked either. Aspiring traders who aim to practice even before making their debut in the market generally use demo accounts. We will talk about it in the last paragraph.

Forex Trading is a psychological fact

The role of psychology in Forex Trading is already a little-shared concept, if not among insiders. Also because the collective imagination sees the successful trader as a cold, rational, calculating man, who sets a goal and achieves it without too many frills, without too many fears. Well, this is a portrait resulting from the media, especially some films. The truth is that the trader, even the experienced one, is a man, therefore is subject to the impulse of emotions, and dominated by his psychic sphere. Psychology involves all aspects of human existence and, on closer inspection, Forex Trading is a fact of human existence. Therefore, it is impossible to talk about Forex Trading without talking about psychology. Obviously, there are more prosaic reasons that justify the link between Forex Trading and psychology. For example, the vicious circle that is generated starting from stress. Trading activities produce stress due to the high performance demand and the stake, which is always significant (money). Stress triggers endogenous pressures of a psychological nature. The body reacts as it always reacts: by producing emotions. An imperfect reaction system, at least in relation to what the market asks of the individual. Also because, in this case, emotions represent a boomerang, a very impactful risk factor. And not only from the point of view of mental and emotional balance, but also in terms of results. The crucial issue is the following: in Forex Trading all emotions, if not moderated or kept under control, represent a very serious risk element. And by all we mean all, even the positive ones. Therefore, it is good to avoid even euphoria, excessive self-confidence, even courage. Excessive manifestations, even if only slightly, contribute to reducing clarity, and therefore to compromising decision clarity, with obvious consequences for one's business. Let's think of euphoria: this is generally followed by confidence in the future, which can easily lead to recklessness. Those who know the dynamics of trading (or are even just able to sense them) know how dangerous an approach even just a little more reckless than usual can be. How to overcome this risk? To tell the truth, it is very complicated. Emotions represent a physiological response to reality, so it is difficult to remove them. Indeed, it is impossible. One thing that can be done, however, is to keep them under control, manage them, limit their effects. It is a skill, this, which in some is innate, for others it is not at all. However, it can be learned, albeit at the cost of a very important work on oneself. A practical method to limit the effects of emotions is to focus everything, or almost everything, on planning. The moment in which emotions generate the greatest damage is in operation. But if this is practically decided at the table, or in any case directed by a very strong strategic approach, here are the emotions, while raging in the trader's soul, they cannot generate any effect. Another method consists in relying on software capable of automating trading activities. We will talk about it in the next paragraph.

The role of software

Exactly, even software plays a leading role in Forex Trading. Nowadays, success also passes through the "most technological products". The purpose of these tools is not to replace the trader, that is to replace the human element, but to speed up some of his activities, avoid some trivial mistakes and protect him from some drifts. There are many prejudices around the issue, both in a positive and negative sense. The "optimists" think of software as a means of making easy money simply without doing anything. Pessimists believe that, very simply, they are scams, a way to attract the naive and the lazy. As it happens, they are all prejudices. The reference is to Expert Advisors and Robots. Their function is to replace the trader at the time of operation. They carry out, so to speak, mechanical type actions. It is obvious: they must be programmed. Through the management of the settings, the trader can replicate his strategy. From the point of view of the general approach to trading activity, therefore, little changes. What changes is the potential effectiveness, which is much higher. It is for at least two reasons. Protection from psychological pressures. We have already mentioned it. The most serious emotional upheavals emerge in the operational phase, but if this is guarded by a "machine", emotions do not generate any effect on trading activity. Greater presence on the market. The trader who operates "manually" needs to rest, regain clarity, eat, sleep. A machine is a machine, and as such it can work indefinitely. This determines the possibility of guarding the market twenty-four hours a day. The number of opportunities that can be exploited, therefore, grows enormously. There is a class of Forex Robots that integrate a second tool, namely the indicators capable of generating signals. In this case, it must be said, automation is complete. In theory, on the basis of very few settings, it is the software that can do everything. In any case, we need to take it easy with this kind of product. First, because artificial intelligences, although they have made giant strides in recent years, are still quite far from replicating man's interpretative and decision-making ability. Therefore, man is better in at least one eventuality: handling the unexpected. Obviously, as long as you have a minimum of experience and a good technical background. In any case, software represents something important, a potential ally for traders. You need to know how to use them, however, in order not to lead to abuse and imprudent approaches. Maintaining a good balance between discretion and automatism, it must be said, is not at all simple. By the way, all the other IT products that do not serve to automate trading are also part of the software issue. For example, the platform. No one can trade without a platform, not in the modern era. Take care to choose one that suits you, that really meets your needs. If you are undecided, go for the safest option and choose the most used platform to date: MetaTrader 4 (even 5 is very good though).