Why do some forex traders empty their accounts within a few months while others earn honest or even significant profits? What character traits comprise the effective forex trader? More importantly, what can the currently ineffective trader do to change that status?

The ability to shrug off a financial loss, possibly a substantial one, without allowing the experience to cloud one’s judgment. All too often, forex traders rashly enter ill-considered trades, then become angry when the market moves against them and place a trade in the opposite direction, hoping to recoup some of their losses. The unfortunate fact is that more often than not, these “revenge” trades are as ill-considered as the first, particularly in this currently choppy market which has demonstrated an uncanny ability to turn on a dime as soon as a trade is entered. A wiser move would be to pause for a deep breath, re-examine the charts and calendar of fundamental announcements, and start again from scratch with an eye toward determining which part of the forex trading picture was previously missed.

The ability to keep emotion out of trading decisions. Fear, greed, and nationalism may have their appropriate places, but inside the forex trading market is not one of them. Entering a trade on greed, hoping to catch a few pips from a market movement without first analysing the charts, is no wiser than exiting a winning trade too early without that same analysis from fear the market will turn, and patriotism for the currency of one’s nation is utterly misplaced in any trading scenario. One should save the cheering for the sports stadium.

An analytical mindset with the ability to correlate disparate data. Frustration awaits in forex trading for those without a naturally linear thought process, but this at least need not be fatal for one’s account. The best solution is to develop a step-by-step procedure for chart reading and planning a trade, and follow it rigidly during every session. Soon the procedure becomes second nature and a close cousin to a natural analytical inclination, leading to more thoughtful forex trading and likely better profits.

The ability to recognise patterns. The lack of this ability has caused the ruin of more novice forex traders than any other except poor money management. Without the ability to recognise when a double top or pennant is forming on a chart, the trader will be ill prepared to take advantage of the change of trend or breakout to come, resulting at the least in a lost opportunity if not actual lost profits or equity. This ability, if not native to one’s mindset, can and should be practiced as part of the step-by-step procedure described above.

A willingness to study the forex trading market, its fundamental and technical inputs, the individual currencies, and how all of these factors combine. It’s astonishing how many people believe they can jump into forex trading without adequate preparation, particularly as these same people would not be likely to make the same mistake in any other investment decision, such as purchasing real estate or buying a car. In this field as in any other, disaster awaits arrogance and if learning does not assure profit, it at least inclines one more toward that direction than otherwise.