Success isn’t a given. Some people are winners in life and some people are losers. There are millions of forex traders out there, playing the foreign exchange markets to the best of their abilities, and most of them are mediocre at best. The truth is it isn’t easy to make money trading using a forex trading account, but some people do manage it – with great aplomb.
George Soros is one of the most famous traders. The highlight of his career was netting a US$1 billion profit after short selling GBP10 million. This notorious trade broke the Bank of England and forced it to withdraw from the European Exchange Rate Mechanism.
Other notable individuals include Stanley Druckenmiller, Bill Lipschutz, and Andrew Krieger. So, what made them the cream of the crop?
1. An Appetite for Risk.
Because forex trading is a leveraged product, it is possible to lose far more than your original trade. Traders use leverage to increase the potential return on their investment. High stakes investment positions mean high returns, but when you borrow money to make money, you are dangerously exposed.
In 1987, Andrew Krieger had a capital limit of $700 million in his position at Solomon Brothers. He leveraged his trading limit by 400:1 to make a killing on NZD, but if the markets had gone against him, it could have been disastrous. Nick Leeson knows this only too well. His high-risk trading strategy made £10 million for Barings Bank in 1993, but it all went horribly wrong and by 1995, Leeson had gambled away £827 million.
The moral of this story is that successful forex traders need a strong stomach for risk. It’s impossible to make large profits without taking risks and leveraging your position.
However, there is a big difference between taking a calculated risk and gambling with impunity, so make sure you understand the difference.
2. Learn from Your Mistakes.
We all make mistakes. Nick Leeson would be the first to admit he made a few mistakes. However, the important thing is that you take responsibility for your mistakes and learn from them. People who fail in life fail on both counts. They often refuse to accept they did anything wrong or they dwell on what happened and let it drag them down.
Allowing emotions to cloud your judgment will be your downfall.
The forex market is free of emotion, so if you want to be successful as a day trader, you need to become a self-disciplined, unemotional, sociopath – at least while you are trading. If you make a mistake, look at where you went wrong, analyze what happened, make some adjustments to your trading strategy, and move on.
3. Attention to Detail.
There is a degree of luck in successful forex trading, but for the most part, success is hinged on knowledge of the markets and paying attention to the news, both political and financial.
George Soros made a fortune when he successfully predicted the Black Friday crash following the UK referendum. He bet against GBP and made £1.5 billion. He also bet on the price of gold rising following Brexit, which was indeed the case.
This illustrates perfectly that following the news and paying attention to what’s happening in politics can help you find a winning position.
Success rarely happens overnight. The most successful traders work extremely hard at building their reputation and honing their trading strategies. Are you one of them?