What Skills do You Need to be a Successful Forex Trader – Big News Network
The forex market is a vast global entity, and one that boasts an estimated market value in the region of $2.409 quadrillion.
However, while the forex market may be highly lucrative and appealing to novice traders, it;s also a volatile and highly leveraged entity.
Such factors will create significant challenges, which will require a number of soft and hard skills to comfortably overcome. We’ll discuss the skills necessary to be a successful forex trader below, while asking why they’re so important.
1. An Understanding of the Macro Drivers That Impact on Forex
Not all markets have been created equal, which means that each one is vulnerable to specific economic factors and macro drivers. As a result, the factors that influence forex are different to those that impact indices trading, so you’ll need to understand these in detail while factoring them into your wider strategy.
In the case of forex trading, macroeconomic factors are especially prevalent, particularly a country’s base interest rate.
This was borne out during the coronavirus pandemic, when many developed economies sought to slash their base interest rates as part of wider quantitative easing measures. This automatically reduces the value of national currencies, while making them less appealing to foreign investors and limiting capital inflows.
GDP and trade inflows also have a less direct impact on currency values, so it’s important to keep this in mind throughout your trading career.
2. Strong Numerical and Analytical Ability
Currency trading is based on numbers and values, which dictate the relationship that exists between each side of a currency pair.
So, on a fundamental level, you’ll need to possess a strong numerical ability when trading forex, as this enables you to quickly process information and calculate real-time interest rates prior to executing individual trades.
Similarly, an ability to think analytically is important for forex traders. After all, there’s a great deal of analysis of individual currency trends and price movements, so you’ll have to process this successfully if you’re to make ultimately informed decisions.
3. Discipline and Determinism
Last, but not least, you’ll need at least a small amount of discipline to trade successfully on the forex market.
The reason for this is simple; as this enables you to adhere to your chosen strategy and avoid emotive decision-making, particularly in the wake of unexpected or sustained losses. Discipline also prevents you from opening overly leveraged positions and committing more than you can afford to lose, with a crucial rule for all traders to adhere to.
Also crucial to this is a keen sense of determinism, which helps you to recognise the underlying laws that govern change in the forex market and factor these into your decision-making.
Without these types of provision, you may struggle to manage your capital effectively and could ultimately become one of the many traders who regularly lose money.
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