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How I Day Trade Forex Successfully – Master Your Mindset

July 10
18:36 2010

When I first wrote the title to this article, it took me a few days to think about the content I was going to include. I wanted to cover a topic that massively impacts results, yet it is far too often overlooked and neglected, that is your mindset. Trading forex, and especially being a short-term trader, there are certain mental traits that success will require!

New Mindset - New Results

Additionally, I really wanted to base this off personal experience by thinking back to when I was learning to trade, and trying to remember the areas I struggled with. More importantly, what were the areas I struggled with, that once fixed, propelled me towards becoming a profitable day trader.

As you read through the 3 points discussed, it’s important to think back on your own trading to determine whether or not this is something you struggle with. If you want to replace one of two of the items from the list with things that fit you better personally, by all means!

With that being said, let’s jump into 3 recommendations for developing the proper mindset, and simple steps you can take today to see immediate improvement in your trading results.

Be Determind to Succeed

Above all else you have to be determined. This might sounds very simple, but let me break this down a bit further. 

Very simply put you will not just learn a forex trading strategy and start turning a profit right away. Learning to trade is a process that will take months and for most years. 

You have to remember that you’re competing with the largest institutions in the world who hire the best talent in the industry. Thinking you can just compete against them with little or no training is why the forex market ends up being the graveyard for most traders hopes and dreams rather than being a pathway to riches.

Most traders are simply not ready, willing, or able to give up what is required to be successful.

My recommendation in this area is to really understand why you want to become a trader and you’re realistic plan to achieve that goal. To do this you might:

  • Create some type of vision board that clearly illustrates what trading success looks like to you. This has a very important function as it reinforces why you’re putting in all the time and effort which will preserve you through the hard times.
  • Write out your goals and be very clear about what you really want. I also recommend setting checkpoints that you meet on the way to your main goal.
  • Learning from those who came before you can speed up the process. Seeing your trading mentors success as well as the success of the students can be an anchor for your determination to fight through the rough times.

I cannot stress these point enough because you will initially fail when setting out to learn the forex market. That being said, it’s not how many times you fall it’s how many time you get up that will determine your success!

Narrow Your Trading Focus

The second key trait to how I day trade forex successfully, is a narrowing of focus . There are so many trading methods, techniques, and forex trading strategies out there that it is very easy to get caught up in the mentality of trying to master them all.

My recommendation would be the exact opposite. Pick one trading strategy and stick to it for at least 3-6 months. To often people gain a mediocre knowledge of the strategy they’re trying to trade, they take a few losses, and then they look for the next ‘magic fix.’

Yes this means that you will miss many moves in the market and many good trades because you are only focused on one trading style. Successful traders know this and accept it, retail traders let the Fear of Missing Out (FOMO) ruin them.

Especially when learning to trade, only focus on one style or trading strategy. After you master that, then and only then move on to another method.

You don’t have to catch every single move in this market, you only need steady consistent gains which will allow you to take advantage of the most powerful tool for growth, compounding!

Did you know a $10,000 account compounded at 10% per month is just over 250K in 3 years, and nearly a million at the end of 4 years.

Narrow your focus and allow compounding to work for you. Find the strategy you want to trade and stick with it for at least 6 months to give it a fair evaluation.

Profitable Trading is Patient Trading

Regardless of the trading strategy you use, patience is essential to profitable trading. Forex trading is boring and that is the way it should be!

9 times out of 10, if someone isn’t profitable then they’re over-trading. I define over-trading as taking trades that do not conform to your trading plan.

Only after I developed a strong sense of the exact trade setup I was looking for did I see any improvement. You cannot improve if you’re taking random trades, system jumping, taking revenge trades, massively over-leveraging, etc. Instead, once your trading plan is in place you have to ensure each setup follows the rules and wait patiently for only those that do.

Only you can force yourself to follow the plan that you lay out. With that being said, here are the best tips I’ve learned in nearly 15 years of trading.

Write out a DETAILED trading plan!

I cannot stress the importance of knowing your strategy in detail. This starts by having a clearly written trading plan that details what you require before taking a trade.

I get asked what should be in a trading plan all the time, but I don’t think there is a set criteria. Some people are visual learners and require more pictures, while others prefer heavy text detail, still others might prefer more of a checklist like a pilot might use.

Regardless of your personal preference, the main point is that you have a trade plan YOU can follow! To produce consistent results you have to have consistent actions. The bottom line is that successful trading requires a detailed trading plan.

Keep Clear Records/Trading Journal

Keep track of every single trade, why you entered, how you were feeling when you took the trade, the time, the currency, the entry price, and everything else important to that trade.

By keeping a detailed trading journal you’ll be able to look back at the positive and negative trades alike, which will more efficiently allow you to identify potential faults. This is critical as you cannot fix what you do not recognize to be a problem and a journal can help you recognize negative patterns that need to be addressed.

This will also force you to slow down. 100% of the time, traders blow up accounts from over-trading, not under-trading. By forcing yourself to record the trade BEFORE placing the next, you keep yourself from falling into the all too common revenge trade, over-trade, boredom trade, etc.

In essence this tip forces you to trade with a greater level of patience which is almost always a struggle.

Develop a Long-Term View Point

For years the forex market was the home of the ‘get rich quick’ mentality. Fortunately that attitude is far less pervasive, but it is critical to do some self evaluation to ensure you’re not falling into the trap.

For me, this was a massive turning point. A long time trader and mentor I had when I was learning to trade recommended that I write out a compounding sheet.

Essentially, this is where you start with an account balance that is reasonable to you, and you compound it by a certain percentage each month. The key is to allow the power of compounding to work for you, by compounding out over 5 years.

As an example, did you know that a $10,000 account compounded at 10% a month grows to over 250K in just 3 years, and just shy of a million by 4 years.

The Wrap Up

So then, how do I day trade the forex market successfully? This article broke down 3 specific mental traits that I feel are critical for success as well as some tips to better implement those traits in your trading.

In nearly 15 years trading experience and having spoke with well over 50,000 traders during that time, the trading strategy you choose to use will only account for 20% of what is required to be successful. 

In other words, without everything else in place the strategy you’re trading means jack diddly! 

Because all strategies will have losing trades as well as draw downs, you have to be able to deal with them without melting down. As an example, if after 2-3 losing trades you always lose it and revenge trade, then the strategy you’re using is irrelevant until you get that problem fixed.

This is just 1 example of many which illustrate the importance of trading psychology and ensuring you have the proper mindset in place!