Becoming a forex trader is undoubtedly attractive because it brings with it the risk, reward and the thrill of trading in the most liquid and largest market in the world. But, what exactly does a forex trader do? Their goal is to make money by taking long or short positions on the various currency pairs that exist in the market. This means that a forex trader is strategic, disciplined and constantly looking for market opportunities. They need to have an understanding of the behavior of the forex currency pairs in order to make profitable trades, which they can accomplish by using a fundamental or technical approach, or both.
The currency market operates round the clock, which means trading never sleeps. There will always be some form of activity happening and forex liquidity levels tend to trough and peak at different times throughout the day. Some people may like to trade in the forex market at odd hours in order to benefit from foreign marketplaces. However, if you wish to be a successful forex trader, you do need to develop a forex trading mindset. In order to do so, there are certain attributes you need to have. What are they? Let’s find out below:
Have interest and passion
If you wish to trade in the forex market, then you need to have a deep understanding and a genuine interest in monetary policy because it is one of the most prominent price movers. For instance, if you decide to trade the GBP/USD currency pair, then you need to be familiar with all of the policy movements of the US Federal Reserve and the Bank of England, along with their statements because they both can influence the market. Therefore, you have to be on the same page as the banks, rather than taking a wager against them.
Possess knowledge about both sides
When you are trading a specific currency pair, you should bear in mind that you will need to stay up-to-date with what is happening in both of the relevant countries. This means that when you are trading the GBP/USD currency pair, then you need to know what is happening in England and you need to be aware of the market conditions and policies in the United States as well. You can only become a good forex trader if you have an in-depth understanding of market trading, which includes chart patterns, the role of central banks, market psychology and stop losses.
Understand money management
Sound money management is what distinguishes a skilled trader and a hobbyist. Learning how to manage your finances is what sets the successful professionals and hobbyists apart, so you need to dedicate some time to understanding money management and even studying it in order to make successful trades in the long run.
Have knowledge about macro drivers
Currency pairs can be influenced by a number of macroeconomic factors, which include rise or fall in the global economy growth. There are additional drivers that have to be taken into account and a good forex trader will need to have knowledge about these because they can also influence currency price movements, which affect your trading decisions at the end of the day.
Have a proper mindset
It is also essential for a prospective trader to be a self-starter, who can learn from their mistakes and hold themselves accountable. A passion for the trading process and the forex market is also of the utmost importance, which means that it cannot be just about the money. This is because the passion will help you in getting through the tough times that you are bound to face in a market as volatile as this one. You also have to have strong self-discipline for developing a well-defined plan, but you also need to be flexible in order to adjust to changing circumstances, since the market is constantly moving and there will always be something happening.