One trait that every successful trader has is constant self-assessment. You’ve probably heard this before, but in trading it’s an absolute truth: you are your own greatest enemy. The following checklist can help you identify the psychological obstacles every trader encounters throughout their trading career. Take a few minutes to read it, be honest with your answers, and reread the list from time to time. You will be amazed at your progress and see real results in your trading account balance.
- After a losing trade, do you feel like “getting revenge” and immediately entering another trade just to get your lost money back? If so, are the losses usually followed by more trading losses? When you are in a “revenge” mode, do you tend to widen your stop loss or trade with no stop loss at all? You will notice that your trading performance is poor when you are upset or disturbed for any reason.
- Do you mentally work on yourself while the market is closed? Do you analyze your trading activity and try to identify what you are doing right and what is wrong in your trading each day with specific steps to address both? Good traders always review their latest trades and analyze them. They even keep a business journal and write down comments, do’s and don’ts. It’s called trading quality control that allows successful traders to trade with the ever-changing forex markets.
- What influence do the days when you lacked discipline and/or adequate risk control have on your total profit/loss? Do you have and strictly follow risk and money management rules?
- What is your mood while trading? Before entering a trade: Are you thinking about the money you will earn? Does the job itself excite you? Smart forex traders don’t think in terms of money while trading. They think in terms of pips. If you think about money, it means that you are not acting for the right reasons. Also, good traders don’t look for excitement, self-esteem, or recognition in the forex market. They trade to make nuggets. And in most cases, you won’t be able to tell if they had a good or bad trading day.
- Do you have any internal dialogue while trading? If so, what is the quality of your internal dialogue? Are you angry and frustrated; Negative and defeated or encouraging and optimistic? Is your internal dialogue constructive and would you like others to talk to you in that way while trading?
- Exiting trades too soon only to see the market rally in the direction of your closed position? Do you get stubborn when you take on losing trades, turning small losers into big ones? Remember: cut your losses and let your profits grow. This is a simple rule and a key to success, but you will find it very difficult to follow.
- Do you like to trade? Do you feel happy while trading or is trading a continuous agony for you? Forex trading is hard work, sometimes tedious. The income can be huge, but this job is not for everyone. Is it made for forex trading?
- Do you spot real business opportunities and trade them? Or do you have a habit of creating opportunities when they don’t exist? Inexperienced and undisciplined traders have a tendency to pull the trigger too often and not according to their trading plan.
- Do you have a unique trait that gives you an edge over other traders? It could be very tight spreads, a fast computer and a special tool, or unusual discipline and perseverance. If you can identify your special advantages and maintain them, you will gradually approach the top 5 percent of traders who make the most profits in the forex market.
- How much are you willing to sacrifice to become a successful forex trader? Think of the time and money each professional had to sacrifice to make a living from their profession. Forex trading is not exceptional.