With any type of trading, especially Forex, it requires dedication when it comes to learning how to trade and developing a solid strategy, as well as gaining the psychological edge to succeed.
While the stats fluctuate depending on market conditions, within our book of clients at Moneta Markets we can see that around 73% of our clients are struggling to turn a consistent profit. Sure, they have their winning trades, but many end up giving those gains back to the market. So, we wanted to know what the other 27% are doing differently that keeps them consistently profitable.
While there can be many factors that contribute to a trader’s success in the forex market, there are two notable differences in the trading behaviour of our clients who turn a consistent profit.
First, regardless of which strategy a trader uses, the data shows that our profitable clients are consistent (and ruthless) with cutting losing trades before they spiral out of control. Second, trades go their way, many clients tend to build larger positions, adding size as the trending market develops so they can squeeze the most out of the market.
Conversely, we’re seeing that less profitable clients tend to exhibit the opposite behaviour, allowing losing trades to drawdown their account, with many adding into a losing position. Then, on positions that move into a gain, most appear to be taking quick profits and missing out on the real meat of the move as it trends in the direction they were hoping it to.
It's in our best interest to retain clients, so we want those who are trading with us to turn a consistent profit. As a broker, we make money on the small spreads, swaps and commissions we apply, and that’s the same for both winning or losing trades. The more profitable clients we have, the longer they will continue to trade with us, which is important to our growth.
This kind of trading behaviour exhibited by many clients comes down to human nature – we struggle to admit we are wrong and accept a financial loss. It’s a difficult thing to do, but it’s critical to trading success. Conversely, when a trade is in profit, clients don’t want to let it get away, so many take quick profits, fearing that it will become a loss.
To transition from a struggling trader into a successful trader, they simply need to take the emotion out of a trade and effectively do the opposite in cutting losses without hesitation when their trade thesis is proven incorrect. Then, when their trade thesis is correct, they need to be patient and build on their profitable positions to get the most out of it, and this is what our trade data indicates.
It’s a simple concept, yet can make the most significant difference. All it takes is a small adjustment in trading behaviour for a trader to start making consistent gains from the forex markets, as well as ensuring preservation of their trading capital.
Another significant factor to consider is the broker you choose to trade with. Some brokers out there try to find reasons to restrict traders from withdrawing their funds if they identify they are consistently making good profits. At Moneta Markets we actually look for profitable traders as they are beneficial to our business model.
If you’re a trader and want any information or have any questions, we’re here to help, so get in touch and we’ll be happy to assist.
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