The most alarming statistic for those starting a career as a Forex trader is that only 15% of currency market investors end the year in profit, thus achieving some results. However, there is another statistic that makes one reflect and provides an idea of how difficult it is to start trading: 98% of new traders throw in the towel by the end of the year.
The reasons are varied. The most obvious is the loss of results. If results do not come, one loses interest in Forex trading and consequently the hope of generating profits. New traders obviously hope not to be part of that 98%, and maybe they force themselves to hold on, convincing themselves that yes, they can do it. However, conviction and willingness are not enough. It is necessary to go to the origin of the difficulty that new traders encounter when trying to emerge. Even here, a single answer does not exist. Certainly, mentality has a negative influence. Those who approach the world of Forex Trading do not survive, and thus decide to throw in the towel, because they do not have the right mentality. Now, despite what common sense says, in this case seasoned with a rich dose of rhetoric, winners are not born, but made. Therefore, a winning mentality must be built.
In this article, we will provide some general advice on how to build a winning mentality. We will present some fundamental steps. To be clear, it is not necessary to follow them in this order, but they all need to be taken into consideration.
Develop a comprehensive vision
Many beginner traders believe that it is sufficient to learn a trading system, use some pre-packaged techniques, and stick to them to make a career in the currency market. This type of trader tends to focus everything on technical analysis, since the rules of interpretation are well-established and reproducible. One can certainly learn, and in a short time, how to use an indicator. Similarly, one can learn to read the signals that come from studying the chart. All of this is a good thing, indeed a necessary act for conscious trading.
However, it is not enough to engage, however profitably, in technical analysis. It must be integrated with fundamental analysis, i.e., the study of factors external to the market that can influence the price. Only a good fundamental analysis is able to provide a comprehensive vision that can genuinely guide the trader in his investment activities, and that creates the conditions for an effective response to market stimuli.
In practice, this translates into identifying the market movers that involve the pair being traded. For example, if trading the euro-dollar, it is certainly useful to forecast the trend through technical analysis, but it is absolutely necessary to take into account central bank deliberations, macroeconomic data of the U.S. and European economies, and the political climate in the United States and the Eurozone countries.
Develop discipline
Based on a certain film production, common sense assigns winning traders qualities such as courage, creativity, and intuition. Well, this is a completely wrong view. The trader, far from being a histrionic creature, takes on the appearance of a scholar. More than an eagle, which perceives its prey through its senses and hunts it, he is a bookworm. The trader analyzes, ponders, and only then acts. It is certainly an activity that requires its time, composed of steps that can be boring.
What distinguishes him, therefore, is a sense of discipline. This translates into the ability to adhere to the procedures that he himself, in a period prior to the operational phase, has identified. The real trader, i.e., the trader who can boast a winning mentality, respects his trading plan. He does so because it serves a purpose, but also to better live the investment experience. Knowing at every moment what to do and how to do it, he shields himself from emotional involvement, which would compromise his lucidity.
Of course, discipline does not rhyme with stupidity, so if his trading plan proves fallacious, he would certainly be able to change it. However, even the change of strategy follows certain rules.
Accept losses
This is a "psychological" step of fundamental importance. It is clear: no one likes to lose, in trading as in life. Yet, sooner or later, one is called to take a decisive step: learning to accept defeats. This applies in life, which is certainly dotted with ups and downs, but it applies even more in trading. Sooner or later, and in the young life of the beginner sooner rather than later, defeat comes to visit. And it does so with the traditional load of disappointment and disillusionment, as well as despair for the loss of money.
The beginner trader must convince himself of one thing, which is then a real fact: in trading, one often loses. Everyone loses, including the great experts and gurus. The important thing is to gain in the medium to long term, but in the short term, it is inevitable to taste the bitter gall of defeat.
Realizing how things work is necessary, also because it protects against unpleasant consequences. First, the trader who has learned to lose does not get discouraged if one or more trades have gone wrong. He does not get discouraged if he is losing his capital. He is aware that it is in the nature of things, and that he can make up for it later. Second, he responds better to adversity: there are no emotions (negative) strong enough to paralyze, like a trauma, future moves. Finally, it offers effective antibodies against sadness, allows one to process grief quickly, which is a great thing even when one is in full possession of one's lucidity. In short, a Zen attitude helps to live well, even in trading.
Do not wait for the deus ex machina
Waiting for the winning solution is a mistake made by many "new traders". One might say that, deep down, it is not their fault. Some responsibility lies with brokers, who use a promotional approach made up of simplified, attractive messages. Many of these messages tout some solutions (however useful) as good in every case and under all conditions. The reference is to indicators and, sometimes, to trading systems. So beginner traders live in the myth of the method capable of solving their problems. A myth, it is good to specify immediately, that is false. In trading, and especially in Forex, there is no Holy Grail. Of course, it is absolutely necessary to use a trading system but one's own trading system, or even just an adapted version of the many TS that are found around.
In any case, no ace up the sleeve, no rabbit out of the hat, but rather sweat, toil, application, and discipline.
Get help. Pride is an ugly beast, as well as an extraordinarily widespread defect. In life it creates some problems, but in Forex Trading it causes incalculable damage. First, because it pushes the trader to persevere in errors. Doing otherwise would be equivalent to admitting to having made a mistake, a concept that proud individuals have a hard time digesting. Second, it prevents the trader from asking for help, when needed. Yet, despite the market being an extremely competitive environment, the trader can and must get help. A request that translates into a well-posed question to more experienced traders, into a request for information, but also into a willingness to learn, thus to go back to studying. Very often, beginner traders throw in the towel because they do not get help, and they do not get help because they hate to admit they were wrong.
