It takes time, patience, experience, knowledge and a steely frame of mind to become a professional forex trader. Professional forex traders manage huge sums of money and every money manager must be careful at every step of the way. No beginner or amateur forex trader can ever consider himself as a professional even if he reads up and imbibes forex trading best practices. Knowledge alone is not sufficient; you need hands-on training from an professional forex trader to know what it takes.
What Sets Professional Forex Traders Apart?
- Forex traders do not waste time in predicting day-to-day movements of a currency pair. They look at the bigger picture and analyze the currency trends by interpreting the fundamental news and technical indicators – for example, understanding the Eurozone crisis and then reading the 200-day EMA (Exponential Moving Average), the 20-day EMA, the 4-hour EMA, and the current RSI (Relative Strength Index) of the EUR/USD pair can help professional web analysts and traders understand the long term trend of the pair and whether it is presently overbought or oversold. They can then place their orders based on their experience and judgment. Professional forex traders know that the hourly time-frame charts contain meaningless noise and therefore they first focus on understanding the long-term trend before dabbling in hourly trades. Beginners cannot expect to start off on such a strong note.
- Beginner and amateur forex traders get all emotional and hold on to their positions. A professional trader has no emotions while trading – he becomes a cold, calculating robot when it comes to playing the forex market. He sets very strict controls on himself – he books profits and stops losses exactly as per his strategy. His rule is to first devise a sound strategy per currency pair and then stick to it. He does not let emotions rule his trades.
- It is a myth that professional forex traders make money all the time. They don’t – they do bear losses as well. However, there are a couple of differences – one, professional traders will always allocate a part of their capital for forex trading and ensure that their trading capital adequately covers their margins and risks; two, professional traders are mostly right than wrong, and therefore their percentage of winning trades is always higher, and that is why most professional forex traders make money in the market.
- A professional trader will not jump from one trade into another. He follows a daily or hourly strategy. For example, if the Fed is meeting at 12 noon to take stock of the interest rates and the news says that the interest rates will hold steady but the technical indicators say that the USD is already in an overbought zone anticipating the news, then the trader may decide to short the USD against other strong currencies (just before the meeting starts). He will not follow the news, he will strategize based on the price action. He will stick to his strategy and book profits or stop losses based on his targets. Such traders enter into a few trades instead of jumping into multiple trades without using logic or without a plan. They also know it is more profitable to hold on to a winning position rather than getting in and out of several trades every day and end up paying brokerage or incurring losses.
- A professional forex analyst or trader is very precise. He follows pips with an eagle eye and sets his trailing profit and stop losses based on pips. A pip is the smallest price change that a currency pair can make. For example, if the EUR/USD is ruling at 1.294 and the forex trader is of the opinion that the EURO has been battered enough and will move up, then he may pick up a few lots of EUR/USD and set strict profit and loss targets of 1.298 and 1.290. If the EUR/USD moves to 1.298, he will book his profits or move his stop loss to 1.298 and if the pair falls to 1.290, he will book his losses and come out of the trade. So, in this example, the trader was happy with making or losing 4 pips either way. Most amateur traders are not bothered about such small movements – they just dream of making big money by following their emotions and street-savvy-ness. The thing to understand is that professional traders know exactly what they want. They are very determined before entering into a trade and do not allow market rumors or anything else interfere with their strategy.
- A professional forex analyst or trader plays around with a variety of trades. He knows how to interpret the technical indicators and reconcile their interpretations with the fundamental scenario. Traders know which way the currency pair is headed over the long term and based on all the knowledge and inputs that they possess, they develop a strategy and enter into hourly, daily, weekly, and monthly trades. They stick to the lot sizes they are comfortable with and do not overtrade.
Trading the forex markets can be very lucrative so long you do it right. And, you can only do it right if you have the steely mindset of a professional trader or a forex analyst. Beginners and amateurs may make money over the short-term, but they tend to lose it all and some more over a long period. Professional forex traders make money – and that is why there are people who do nothing but trade the forex markets 24/5.
If you are a beginner, then do not even dream about entering the forex market – you will lose money and end up paying commissions. Instead, spend some time and hire a trained professional to coach you. Professional forex traders with years of experience can teach you how to interpret fundamentals, analyze technical indicators, how to develop a steely resolve, the importance of booking profits and stopping losses, understand how the forex market works from the inside, and more. Knowledge and a strong psychology will then help you succeed in your trades and operate like a professional. Good luck.