International Trade And Finance In The Global Economy Practice Exam The ABC of a Successful Trader

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The ABC of a Successful Trader

Forex Trading is built on educated, disciplined and independent individuals whose years of expertise in the field of Foreign Market Exchange have resulted in a true mastery of trading skills. A successful trading business functions a lot like a team of highly skilled soldiers: Like a good soldier, professional traders must visualize the battle before entering into a fight with their opponent. To secure victory, both warriors and merchants must take the appropriate steps before acting.

“Sacred Market” and “His Orders”

The market treats all traders the same; it is the implementation of an accurate strategy that determines the destiny of a trader. Being a successful trader is indicative of the excellent work done hours before the market opens and also long hours of work, only in profit ordering and controlling impulses such as those incessantly instructing you to “get in and make more money”

Preparation is half the battle

The key to successful trading is good planning. A great trader is one who knows exactly what he is looking for. He will use the necessary time and effort to research and develop a strategic plan that includes both short term and long term goals.

Planning includes making a list of necessary actions for a successful trading day, i.e. actions set to make a profit. The first step is to review the previous day’s trading journal to prepare for the next trade. The second step is to do a chart analysis to find out which currency pairs to follow. Finally, the third is setting up your trading platform; do so by reading the latest global economic data from the international economic calendar. This will reveal whether the currency you are monitoring has been affected by recent economic developments.

Develop your trading instincts

Having an aptitude for trading is a boon for any trader, but such skills take years of practice to develop. Most traders use their “6th sense” to spot and seize opportunities for small price differences both within and between markets.

Just like a manager, a trader must rely on his analysis and intuition to spot trade setups at the right time. However, a novice trader can still develop this understanding and make money consistently by strictly following the principle of risk and reward in Forex trading. This principle demands careful study of what a trader is willing to risk.

100% Discipline

The best traders are very self-aware. They know their limitations and focus on what is wrong with investing their energy in limiting and controlling their risks.

To achieve success in Forex Trading, the most important step of all is sticking with your strategy. A carefully crafted plan guides a trader through the fundamental and technical analysis necessary to interpret price movements, interpret technical indicators and identify ideal trading positions. Good traders are disciplined traders; he was like a hunter, preparing for days to strike the perfect trade arrangement. He chooses the right stop loss point which marks the acceptable amount of risk; he never allows more than the most efficient amount of risk. He was never gripped by greed, fear, hope or regret and did not exaggerate his hopes for success. His excellent decision-making skills prevent other people’s opinions from misleading him, and he doesn’t over-analyze or trade. Despite his success, he remains humble and always provides honest guidance to beginners and fellow traders.

Get rid of the need for money

Successful traders view trading as exercise, and they focus on getting the most out of the market according to their plan. In short, a good trader should not be motivated by financial rewards. If this rule is violated, as it often is, the market will reverse and move against any trader who has an excessive desire for money.

Greed is the archenemy of all traders. This presents a major hurdle on the way to success. The desire to possess must not govern the actions of a merchant; the result of such a loss of control is always catastrophic. To a small extent, trading is an opportunity to make money in a certain time if all the rules are followed. However, it is also an opportunity for self-fulfillment and a test of one’s most prized ability, and it should be respected as such.

Stand firm as a rock

A good trader must stick to the rules of his strategy. He must not allow emotions such as greed, fear, hope and regret to overwhelm him; these in particular are the four worst emotions for a trader. Consistently profitable traders have an unwavering emotional system regardless of the conditions.

Like greed, dealing with emotions during trading is also a constant challenge. The first thing a trader should do is follow a strategy that is comfortable for him. To avoid emotions, traders should enter trades with realistic expectations; risking a reasonable amount of money on a trade; and learn to enjoy trading risking less money, gaining experience and developing confidence in the strategy.

Adapt to change

The best traders are always eager to learn and improve their skills to keep up with the continuous changes of market and technology. A trader must be flexible enough to cope with technological advances and read intensively.

In a constantly changing Forex environment, traders need to be flexible. If the market throws something unexpected at him, traders need to be able to analyze it and take action quickly. Success in the Forex market demands a continuous learning process whereby traders understand market volatility and in return gain the skills needed to make profits.

Good decision making skills

A successful trader must have excellent decision-making skills. As soon as you realize that your trade will close with a loss, get out immediately. Successful trading is primarily based on sound decision-making and has a lot to do with the current relevance of the data collected. Successful traders are also independent in their decision making.

The main difference between a professional Forex trader and a novice is that the former knows exactly what he is looking for and when to enter the market.

Recognized successful Forex Brokers respect each of these rules. They work hard to be successful and even harder to stay ahead and stay profitable. They know that the market will reject those who disobey these rules for money because trading is a practice of lust, not greed.

Successful trader

George Soros gained international recognition when he overthrew the Bank of England on September 16, 1992, a day that has gone down in history as “Black Wednesday”. He was given the nickname “the man who broke the Bank of England” because Britain was then forced to abandon the Exchange Rate Mechanism which aimed to fix the pound exchange rate to the Deutschmark.

Soros risked $10 billion and made $1 billion profit in one day.

“The money I made on this particular transaction is estimated to be around $1 billion. We use the futures market very simply – you borrow sterling and you sell the sterling that you have borrowed. And then you buy back the sterling when the loan expires”. (Soros, 1992)

George Soros was also accused of triggering the Asian financial crisis by selling the Thai baht and Malaysian rigit in 1997. Thailand proactively spent nearly $7 billion to protect the baht from speculators and eventually turned to the International Monetary Fund for help. In The Crisis of Global Capitalism: Open Society Endangered, Soros (1998) responds, “Prime Minister Mahathir of Malaysia accused me of causing the crisis, an allegation which is completely unfounded… We were not currency sellers during or in the months before the crisis; on the contrary … we bought ringgit to realize the profit from our earlier speculation”.

Soros earned over $790 million in this trade. “It’s not right or wrong that matters, but how much money you make when you’re right and how much you lose when you’re wrong,” he summarizes.

The 3rd most famous trade that Soros has made occurred in 2012, when he realized the possibility that the yen could fall after the damage that the Japanese economy suffered during the devastating tsunami of 2011. Sure enough, the yen does weaken, and when it does, to improve the situation In economic terms, many speculators open USD/JPY positions betting that the dollar will appreciate against the yen. In this case, Soros earned $1.4 billion.

The main technique of Soros and other leading traders is to spot impending vulnerabilities in a country and then chase the currency before it crashes. A currency pays off better when its exchange rate is fixed in relation to other currencies, as in the case of the Thai pound and baht.

Vulnerable countries try to buy their currency when it is being sold, because people can turn around and sell the currency themselves. These countries do so in an attempt to artificially maintain interest rates fixed. However, this artificial balance is very sensitive, and when countries can no longer resist market forces, the balance will collapse. This is what happened in the Soros case.

As Soros points out, a threat to others can be a great opportunity for traders who are alert and ready to act. Soros is an example of a fine soldier who used his disciplined mindset, analytical approach, and all his market cues to become a successful currency trader. He expertly and calmly conducts himself in the currency war markets and displays a combination of patience with discipline to identify the right time to execute his trades. Obviously, the quality of a proficient warrior could also become the quality of a great currency trader.

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