What Differentiates a Failed Trader from Successful Trader?

It is said that a successful trader has a better understanding than the failed one. Is it as simple as that?

What makes a successful forex trader, and what makes his peers failed? A survey by France financial regulator, Autorite Des Marches Financiers (AMF) published in 2014 revealed that of 14,799 active individual, in four years period 89% of them lose money.

It is easy to say that successful forex trader has a better understanding of how to trade and manage capital and risk. However, the reality is far more complicated.

More often than not, the gap between a successful forex trader and his peers lies in the fact that they see forex trading differently.

1. Insistent VS Conditional

When someone started to trade, he probably dreams of making big and consistent profit. Therefore, he chases every opportunity that appear in the market, based on every technical indicator he has applied and every news that come his way.

It is not exactly wrong and some people have actually made money this way. Even so, once he has grown up and gain more experience, he will see that it is unnecessary to be so insistent and that by doing so he opens the door for many losses along with his profit probabilities.

An experienced trader will trade in accordance with market conditions, especially noting the current volatility. He understands that loss is an ever-present threat, and therefore tailor his positioning by proportioning lot sizes with volatility, and considering his own mental preparedness along with it.

Forex market changes dynamically every seconds, thus chasing every opportunity will only increase risk exposure and tire out himself.

2. Volatility Lover vs Positioning

Many forex traders equal big volatility with big profit. They argue that trading in big volatility enable them to gain big profit in a short time.

Even worse, beginners often think that it is better to trade in bigger lots, because small lots are just for sissies and they will surely regret if the trade later prove to be succesful. This is very wrong and may be the first signal that lead to failure later.

What they forget is that High Risk, High Return; the higher the chance to gain big, the higher the chance to lose big. Successful forex trader can trade in low volatility as well as in higher volatility, and sometime even loves low volatility better.

Furthermore, as previously mentioned, experienced traders tailor their trades in conjuction with the most current circumstances. Position size and volatility should be arranged conversely.

Hence, if it is during high volatility when the risk higher, then the correct thing to do will be to lower lot sizes accordingly.

3. Understanding of Analysis vs Understanding of the Market

Beginner forex traders often has low knowledge about forex and its surrounding influential issues. Therefore, they consider every analysts' inputs and use them to insistently chase the dream of big profit they had.

Sometimes they even become loyal followers that will submit to every ideas and opportunities predicted by the analyst. It is not wrong, because at the end of day, analysts are not going to mislead its followers purposefully.

But an experienced trader puts analysts' prediction only as sidekick. He analyze the market themselves and uses prediction as additional references only when needed.

For experienced traders, price is the only truth in the market. They also accept that market changes everyday, thus always prepared to the possibility of unexpected events that may disturb it.

As well, they are ready to sit out for a while if the market is considered too risky or uncertain.

4. Holy Grail Seeker vs Steady Strategy

Beginner forex traders falsely think that there is a holy grail that can flawlessly predict price movements, gather big profit with no risk attached along with it.

Because of that, they continuously seeking new strategy and go on testing a new one every time the old one failed to deliver the expected profits. What they will realize after trading forex for longer is that there is no such thing as holy grail.

Losses are unavoidable both for retail traders with minimum capital and big traders with millions dollar. Successful forex trader realized that one cannot count on winning every trades, but can expect to profit in overall trades.

Therefore, he will focus on refining his strategy, money management, and psychology, instead of seeking the inexistent holy grail. He will accept each losses as is and keep holding on to his trading plan.

Improvement is of course necessary to increase the quality of trades, but it is not a reason to discard your trading strategy, declare it a con, and exchange it into a new one.

5. Put All Eggs In One Basket vs Several Baskets

Don't put all eggs in one basket is such an old adage that it is a wonder if no one in this world has ever heard it. However, those who are new to the financial market often passed it by.

There are even people that, after being warned that forex trading contain high risk of losses, liquidated their assets and put it all into an account.

Afterward, when they found out that forex trading was not as easy as it seemed, they screamed Forex is a scam and it ruined my life saving!

A successful forex trader actually started small. They were looking for experience and knowledge while familiarize themselves with the working of the market.

Only after attaining the necessary confidence and maintaining a certain level of profitability, they are gradually building their account. Moreover, experienced trader know enough not to put all of their money into forex trading.

They will branch into other assets (the most popular are gold and stocks) in order to mitigate the risk. Each asset in the market has different risks and profit factor, so it will help traders in gaining grounds amid the ups-and-downs of market dynamics.

Following those five points, what will be the determining factors that would make a successful forex trader are diligence and discipline. Learn from your experience, learn from others, and improve yourself step by step.

No success can be gained without failure. Even a failed trader could change his fate by learning from his mistakes and do it better, instead a successful trader could later fail if he is careless and trade haphazardly.