What is it about successful Forex traders that sets them apart from the rest?
A well-known figure in the Forex world is that 90% of Forex retail traders do not succeed. Some publications quote failure rates as high as 95%.
Regardless of the actual number, having interacted with thousands of traders over the years, I can tell you that those figures aren’t far off.
So what is it that sets the 5-10% apart?
We’ve all heard the typical reasons such as experience, discipline, and strategy. While those may be factors, there are other less obvious differences.
The bottom line is this…
Successful Forex traders think differently from the rest. They aren’t concerned with needing a high win rate or trying to trade every day regardless of market conditions.
In this post, I’m going to share with you nine of the top qualities that the best Forex traders in the world possess. What follows is a combination of lessons I’ve learned since I began trading in 2002.
So without further ado, let’s begin!
What Does It Mean to Be Successful?
Before we get into the nine attributes, I want to clarify how we will define success in this article.
Any story about a successful Forex trader must include consistent profits. I think we can all agree that most traders use profits to benchmark the success of another.
However, success in any endeavor is about more than just money. It’s also about the joy and passion it adds to your life.
This is one thing I can’t teach. I can offer help in drawing key levels, determining trend strength and price action signals. However, I cannot teach passion.
You either love trading or you don’t. There is no in between. So the question is if you don’t have a passion for trading, can you really be successful?
Think about that for a moment. If you don’t absolutely love what you’re doing every day, can any amount of money make you content?
I would argue that it can’t.
So as you’re reading today’s post, remember that it isn’t just about the money. If your only reason for trading is making money, then you may want to have another look at your chosen career.
It’s your passion for trading, not money, that will push you through the tough times. Without passion and a love for trading, no amount of money can make you a successful Forex trader.
So Who Are the World’s Best Forex Trader?’
Stanley Druckenmiller has long considered George Soros his mentor.
In fact, the two worked together at the Quantum Fund for more than a decade.
He was even there during Soros’ famous Black Wednesday trade in which they “broke the Bank of England” when they shorted the British pound in 1992.
The duo reputedly made more than $1 billion in profits from the single trade.
Stanley Druckenmiller left the Quantum Fund to start his own fund, Duquesne Capital.
Duquesne Capital Management is famous for posting an average annual return of 30 percent without a losing year.
However, Stanley decided to close the fund on August 18, 2010.
He indicated that the “very large sums” of money were making it difficult to make big profits for investors.
I’ve written about Bill Lipschutz in the past.
He’s known for turning $12,000 of inheritance money into $250,000 while still in college.
He did this by investing the risk capital in his free time.
However, nobody is perfect, and Bill is no exception.
Shortly after turning $12,000 into $250,000, he made one bad investment decision that nearly cost him the entire account. He was back to square one.
But instead of throwing in the towel, he used that loss to fuel his passion for learning.
Lipschutz joined Salomon Brothers in 1984 as part of the newly formed Foreign Exchange Department.
One year later he was making $300 million per year for the firm.
Here are four key tenets from Bill Lipschutz himself:
- Time is a risk factor. A three to one reward to risk ratio is acceptable for trades of 48 hours or less, but longer duration trades require a five to one ratio.
- The game is the “thing”. According to Bill, a truly successful trader has got to be involved and into the trading; the money is the side issue.
- Know pain, but don’t fear it. You have to feel the pain of a bad trade, or a wrong trade. If you don’t and are numb to it, then it’s over.
- Insane focus is a must! Bill Lipschutz once said “when they call you crazy, you know you are on the right track. He was referring to the work ethic and insane focus required to succeed as a Forex trader.
Now that we’ve covered some of the world’s best Forex traders, let’s discuss the nine attributes they share.
They Don’t ‘Lose’
Before the emails start pouring in, let me explain…
No Forex trader is without losses. But there’s a distinct difference between how the beginning trader loses and how the best Forex traders lose.
What’s the difference?
Most starting out in the Forex market view a loss as a bad thing. It’s a way of signaling that they did something wrong.
And doing something wrong is bad. At least that’s what we’ve come to believe over the course of our lives.
However, the successful trader doesn’t view a loss as a “bad” thing.
It’s also not something the market did to you. The Forex market doesn’t know where you entered or where your stop-loss order is located.
Unlike you, the market is always neutral. So when you lose, it’s a matter of reflecting on what you could have done better.
Don’t get me wrong, nobody likes to see a trade go against them. I don’t care if you’ve been trading for one month or ten years, it’s always more enjoyable to make money than to lose it.
That being said, just because a trade doesn’t go your way doesn’t mean you should take it personally. Thinking this way will only dig you a deeper hole.
The successful Forex trader has the mindset that a loss is simply feedback.
It’s the market’s way of disproving a trade setup. That’s the only thing the Forex market has the ability to do because it doesn’t know anything about you or where you entered the market, nor does it care.
Losses can be a powerful way to learn. Just remember that even a trade that ends up as a loss can be the right decision.
How is that possible, you ask?
If you’ve defined your edge, and the setup met all of your criteria to enter the market, then you did all you can do. The rest is up to the market, and some days the market just doesn’t play along.
Next time you have a loss, take it as constructive feedback. Analyze the situation to see how you can improve the next time. Keep in mind, though, that even an A+ setup doesn’t always work out.
I’ve had many trade setups that didn’t work out that I would gladly take every single week.
That’s because I know that my edge will win over time and put money in my account. In fact, a good exercise after a losing trade is to ask yourself, “would I take this same setup again next week if it presented itself?”
You should always be able to answer this question with a resounding “yes”.
If you answer with a “no”, you need to take a step back, determine where things went wrong and correct it for the next trade.
Start seeing trading losses as business investments rather than upsetting events. Each loss is an investment in your trading business and ultimately your trading education.
The money you put at risk on any given trade, whether it’s $5 or $500, is an investment with the best Forex coach in the world—the market. Keep an open mind and it’ll show you everything you need to know.