Becoming an Accomplished Trader

The process of becoming an accomplished Forex trader

This lesson will cover the following

  • How to set a plan for your trading goals
  • How to build on your psychological strategy
  • What are the steps of becoming and accomplish trader

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Every trader pursues a long-term goal – to make a huge amount of money in the financial markets. Many traders are willing to trade all day and quit their full-time jobs. Well, these are quite good objectives to have as a trader, but not many traders actually accomplish them.

A major reason why most people do not manage to accomplish their long-term goals is they lack a plan for action, which to reveal the whole process until the goal is achieved. We shall take our time to discuss how a trader should reach his/her long-term goals in Forex.

Decide the purpose of your trading

crossroadIt is up to a person to decide if he/she is willing to be a full-time trader based in his/her home, or be mobile – to trade and live anywhere on the globe. Is he/she intending to just supplement his/her monthly income from his/her ordinary job? Is he/she willing to manage money of other people, while trading for a particular company?

Every person needs to first clarify what his/her ultimate trading goal is. He/she may write it down in his/her trading plan or on his/her white board. Either way, a trader needs to make sure he/she has clearly defined the ultimate objective.

Break up goals into short-term checkpoints

It would save a lot of work, if a trader divides up his/her long-term goal into shorter-term ones, which could be accomplished within, say, a period of one month. The final trading goal may be imagined, as a series of smaller goals, which are to be accomplished every month. If a trader manages to reach his/her smaller goals each month, they should be marked as “accomplished”. This way he/she may bolster his/her natural optimism and gain confidence that the eventual accomplishment of the primary trading goal draws near.

Many traders pay so much attention to their long-term objective of becoming a professional trader or expanding their trading account in the fastest possible way, that they make little or no effort to figure out how exactly to achieve this in a more realistic way. At first, most traders feel a strong surge of anxiety, which causes them to lose their patience and make the wrong decisions in the market, obsessed with achieving their goals.

In time, all the short-term goals will amass and form the long-term objective methodically. This means that it is best to work backwards – to begin with the final trading objective, after which to divide it up into realistic smaller goals, that can be achieved within a relatively short period of time. With the achievement of every realistic short-term goal, the trader’s confidence will likely improve, which will be reflected in his/her overall gains. This way he/she comes step by step closer to achieving the ultimate trading goal, no matter what it may be.

Example

pencilLet us give an example for short-term trading goal. It rests on simple rules. First, to strive at making a fixed amount of trades, say 10 per month and no more. This smaller goal will prevent a trader from over-trading, which often is a major reason for losses in the long run.

Second, to risk one and the same amount of money in every trade, but no more than the amount one feels comfortable to lose.

Third, to look for a risk reward ratio of 1:2 or even better on every trade.

Fourth, to keep record of every trade in a trading journal.

Fifth, to take only those price action trading setups, which are compatible with the guidelines in the trading plan.

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Trading as a psychological process

There are five basic stages through which each trader should pass in order to complete his knowledge and get a feel of the market psychology. These five stages can be presented as follows: unconscious incompetence, conscious incompetence, a moment of awakening, conscious competence and unconscious competence.

Unconscious incompetence

It is the initial stage, which every trader goes through, as he/she is not aware of his/her lack of knowledge. At this stage, beginners will usually be initiated in trading, taking actions such as downloading the platform they intend to use, opening an account at a particular broker and making his/her first entries into the market.

Something worth mentioning is, that beginners are affected by emotions. They are usually quite tempted by the prospect of making a solid profit within a short period of time.

Conscious incompetence

At this stage beginners gradually come to understand their need to amass knowledge. They appear to be guided by the thought that the more they know about trading, the more successful they will be in the market. Beginner traders will usually attempt to put into practice every piece of information or advice, which they have obtained, including books, forums, studies, or articles in the media. They will be looking for the assistance of “expensive experts” and even come to believe the so called “get rich fast strategies”. Therefore, this stage may be considered as the most perilous for every beginner.

The moment of awakening

At this stage, beginner traders come to realize that effective trading in the market has probably something to do with psychology of traders, their approach to global markets.

Traders begin to understand, on a basic level, that they will never be able to foresee which direction the market will take. They come to the realization that in order to expand the value of their account, they must go through a string of winning and losing trades. It takes practice and strict market discipline for a trader to be able to follow an established strategy or trading system, to reduce his/her losses and to allow his/her gains room to develop.

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Conscious competence

At this stage a trader must have progressed to the point, where he/she quits attempting to pick the winning trades. In each case the system reveals an entry opportunity, the trader immediately makes this entry, regardless of what feelings he/she may have about it.

At the stage of conscious competence traders are subject to emotions, thus, more efforts are required in order to achieve discipline. The bright side, on the other hand, is that traders deal with losing trades more easily, and that is because they have finally understood that losses are just a part of the whole process of making money.

What is more, risk management becomes a milestone in trading. What matters now to a trader, is to expand his/her account gradually over time and, by any means, not to attempt to become rich in a blink of an eye.

Unconscious competence

A trader is expected to have progressed to this stage, after he/she has opened and closed a huge number of positions, but more importantly, he/she has obtained valuable skills through continuous practice. The trader is already able to make trading decisions almost automatically. In order to strictly follow market discipline, the trader makes not much of an effort. Discipline is now his/her second nature.

If you have any questions or suggestions you are welcome to join our forum discussion about Becoming an Accomplished Trader.
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