When you enter the forex market, you must be well-prepared to face the fierce competition along with the frequent market fluctuations that make currency trading profitable and risky at the same time. One bitter truth you must know about before entering the lucrative space is that the percentage of traders attaining actual success in forex is around 10% if we believe the studies and surveys are done on the topic. The ones who get long-term success are those with a professional approach and relevant skills to rely on. Beginners can also reach this level of success if they are able to assess what is separating them from these seasoned pros and work on the same to bridge the gap. You need to get past the beginner phase, where you are prone to making costly mistakes.
Today, you will get to know how beginners are different from professional forex traders and what you can do to avoid getting affected by these differences.
Lack of Emotional Control
One of the most notable differences that you can see between amateur and professional traders is how they handle their emotions while trading. As humans, we will surely experience many positive and negative emotions during the trading process. The emotions tend to be even more intense when there is a lack of knowledge or skills, which is why newbies have a hard time controlling their emotions, and this leads to emotional trading. We all know that trading decisions need to be backed by analysis and logical calculations, but we ignore these aspects once we get overwhelmed by feelings and emotions.
No one wants to be irrational or impulsive as a trader, but those who have little to no experience in the fast-moving forex market end up making poor trading decisions out of excitement, greed, fear, or frustration. Feeling all kinds of emotions is normal, but you should never let them influence your actions in the live market. The best way to refrain from emotional trading is to train your mind with stress-management techniques. Make sure all your trading decisions are in accordance with your plan, and use different trading tools to calculate the possible outcomes of each and every trade before confirming your orders.
Not Following Sound Strategies
Another thing that distinguishes newcomers from experienced traders is the type of strategies they follow. There is no doubt that those with enough experience in the currency market will have the upper hand in finding the most suitable strategies for different market scenarios. Their strategies are mostly well-structured and have powerful trading systems specially designed to sustain in the long run. A vast majority of beginners fail to find a sound strategy in the first place, which limits their opportunities and stops them from attaining success. You should not follow a strategy until you are sure about its success rate.
Here comes the need to backtest your strategies and optimize your trading systems before trying it out on a live account. Demo trading is also an important step that a beginner should never skip, as forward testing of strategies allows you to identify their shortcomings in real-time market conditions. You should not select any strategy just because it is popular or profitable for someone else. You need to ensure it will work with your trading style, skills, and personality. Two trades following the very same strategy may get totally different results because one trader was able to pull it off while the other one failed to make it work due to a lack of personalization.
Absence of Trading Discipline
We can never overstate the importance of discipline in the success of a forex trader. Professional traders always have a disciplined approach towards trading, allowing them to remain consistently profitable for a long time. However, many beginners cannot build this kind of discipline, and they end up breaking their own rules due to impatience and impulsiveness. In my opinion, some traders don’t even bother to set a rule-based system, which is a grave mistake. Trading is an independent profession where you get complete freedom to do whatever you want, but you need to keep things under control to get the desired results.
Professional traders will always stick to their strategy and won’t be entering trades just for the sake of it. But newbies are prone to placing random trades at every opportunity they come across due to their FOMO, which is the fear of missing out on opportunities. You must stop yourself from deviating from your strategy, as it usually never ends well. The absence of trading discipline also leads to overtrading, which is one of the most common reasons behind the failure of forex traders. So, strive to become a disciplined trader without emotional bias, and success will surely come to you sooner or later.
Not Focusing on Risk Management
The last but most important difference between beginners and professional traders that I want to talk about is how much they prioritize risk management. Many newbies stepping into the forex world underestimate the risk and only jump in for the rewards. They have unrealistic expectations for profits but fail to realize the risk they are exposed to while placing a trade. This puts them in a dangerous position as they get into trading without a proper risk management plan, pushing them toward losses and failure. Trading without a Stop Loss is like driving without a seat belt, as you don’t have anything to stop you from being hit when there is an unfavorable situation.
Starting with a sound risk management plan is essential to mark a successful beginning to your trading journey in the volatile forex market. Having an optimal risk/reward ratio, trading with a tight stop loss, and making calculated moves allows you to trade while staying inside your safety bubble. But you must ensure that your risk management is not in the way of your profit potential. For this, you can use tools like Forex profit calculators, which tell you the potential trading results in advance. You can also make use of a currency calculator to convert any amount to your account’s base currency.
3 Tips to Transition From a Beginner to a Professional Forex Trader
- Treat Trading Like Your Profession – Being a beginner, you may not be viewing trading as your full-time job or profession, but a touch of professionalism can make a lot of difference to your trading, even if you are a part-time trader. Forex trading may not be your primary source of income in the initial phase, but you need to give it the same amount of dedication as you would for your job or profession. This is not about devoting 24 hours to trading but being focused whenever you find time to trade. Take your time to learn, plan and gather as much information as possible about fundamental and technical trading concepts. Be serious about what you do as a trader and set realistic goals to work for, as it promotes purposeful trading.
- Interact With Professional Traders – One major benefit you get while being in the forex market is the opportunity to interact with experienced and knowledgeable traders. You can easily find online platforms or community forums where you can engage in meaningful conversations with like-minded traders, and you can surely learn some useful things from these interactions. Having theoretical knowledge will not be enough to succeed as a forex trader. Some things can only be learned with hands-on experience, and if you can find genuine people willing to share their experience and expertise with others, you should try to make the most out of such opportunities.
- Take Your Time – In the introduction, I mentioned the cutthroat competition you will be facing as a beginner in the forex world. But you should not let this competition get into your head as it will only ruin the experience and add to the stress. You are not in a race and don’t need to rush things to catch up with others. Start with a low margin initially to understand the market and its quick movements, and when you gain enough experience, you can increase the margin as per your risk appetite. To find out the right margin, you can use a margin calculator. You should have a goal to reach professional-level success in the long run, but be patient and do things at your own pace. Just trust the process; getting the results is just a matter of time.
Conclusion
To conclude, professionalism in trading is not about choosing it as your career but about being committed to doing your best as a trader. Being a beginner, you will have to withstand the test of time. But always remember that all professional traders who tasted success were also beginners in the past, and if they can survive the fresher phase, so can you.
