Forget about trading systems for a minute. Let's talk about the other keys to successful Forex trading.
If you listen closely, you will hear successful traders mention these things. But many times, they are not emphasized nearly enough. So in this post, I'll highlight the five most overlooked keys to success in trading.
I've noticed that there is one thing, more than anything else, that gets glazed over in trader interviews and trading presentations…
The power of backtesting.
For example, I went to a Meetup this past weekend to learn about how this guy trades Forex.
His presentation was good and it lasted about two hours. His Trader Personality needs a high win rate to feel successful. Therefore, that is what he worked on and his win rate is really high.
It's 90%+, for some strategies and currency pairs.
I'm taking him at his word here, I didn't see any verified results. But based on what he said, I believe him. The trade-off is that he has a lower average R multiple per trade.
Remember, there are no free lunches. There is always a trade-off.
However, the point is, that out of this 120+ minute presentation, he spent about 5 minutes on backtesting. He and his trading buddy backtested the crap out of their stop loss placement strategy.
It was actually a funny story because he said that he learned a stop loss strategy from a famous trader. He went back to that trader after he was finished testing and showed him the results.
The famous trader was floored and said:
You actually tested that? Nobody I talk to does that.
From what I could tell, most of the people at the Meetup could care less about this story. Nobody took notes on that part.
But to me, that was one of the most important points in his presentation.
Too bad he didn't spend a little more time on it.
The moral of the story is that you need to backtest to gain confidence in your system and to figure out what actually works.
If you want to get started with Forex backtesting read this post.
…and don't just take my word for it.
These professional traders say the same thing here, here, here and here.
Are you trading poorly because you're embarrassed?
That might not make sense right now, but according to Joan Soktin, that is the most common reason why many people are not where they want to be financially. If you want to learn more, you can listen to that interview.
The point is that we may not be fully aware of why we do the things we do. Our subconscious programming determines most of our everyday lives, regardless if we realize it or not.
So you need to take a step back and ask yourself why you do the things you do…
- Why do you take profits too early?
- Why do you revenge trade?
- Why do you seem to make the same mistakes over and over?
Meditation can help with this process. But there are other ways that we can improve our mindset.
One thing we can do more often is forgive yourself. Many times, we are way too hard on ourselves and tell ourselves mean things.
If you can give yourself some leeway to make a few mistakes, you will be surprised at how much more you will accomplish.
This is just one of the mindset strategies that can help you become a better trader.
Almost all successful traders that I have talked to say that your mindset is much more important than your actual trading system. In fact, that is what we focused on the most during the London Conference.
To learn the mindset skills that can make you a better trader, I recommend listening to this interview and this interview.
3. Personality Matching
Most trading courses say that their system is the best system in the world and it is the only one that you should be trading.
Sure, it might be great.
But unless you understand your trading personality, there is a very good chance that it's not great for you. Even if you had the most profitable trading system ever, you will probably still lose money.
Find out why here.
…and they have to talk in those absolute terms because they are in business to sell courses.
Just like all of the hot women/men out there are not good marriage material, not all of the profitable trading systems out there will match your personality.
To learn how to figure out your Trading Personality, read this post.
…when it comes to your dating personality…sorry, but you will have to find another blog for that.
4. Different Colored Glasses
Everyone sees the world differently.
That famous trader on the internet.
Just remember this, every time you listen to a trader. Many of them will talk in terms of absolutes.
…you can only make 25% per year in Forex trading.
…you should risk 2% per trade.
But remember that this is THEIR reality.
It might not be your reality.
You might be able to make 60% per year trading the exact same system. Your risk tolerance may only allow you to risk 0.5% per trade.
So learn what you can from them.
Just keep in mind that the only absolutes are what work for you.
5. Incremental Automation
A lot of newer traders I talk to think that their trading has to be completely manual or completely automated.
You can automate certain parts of your trading and keep certain parts manual. This is called Incremental Automation.
For example, you can enter your trades manually, then turn on a trading bot to trail your exit stop. Or you could setup trading alerts that notify you of your favorite chart patterns.
Even simple alerts on TradingView can help you stay on top of your trades.
Final Thoughts on the Keys to Successful Forex Trading
So those are the five keys to Forex trading success, that I feel don't get enough love.
Everyone talks about entries/ exits and trading systems. They are important, for sure.
But I would argue that these things are even more important.