Success never comes easy. And this is especially true in the world of financial trading. It is difficult to make money doing anything in this world because the competition is fierce in any field. However, there are plenty of success stories and there’s no reason to think that you cannot achieve your goals as well and become a source of inspiration for others. In fact, having a Can Do mindset is vitally important to succeed.
In this guide we’ll discuss what is success in Forex trading. Who are the most successful Forex traders and what they do to achieve their goals. What’s more, we’ll talk about what it takes beginners to become successful and how professionals set their trading goals.
What does it mean to be successful in trading?
Success can have a very different meaning for various people. For instance, if a student is trying to pass an exam and receives 51 points out of 100, he or she is considered successful in this regard. But when a student is trying to impress family and friends, 51 out of 100 doesn’t look like success. In short, success is an accomplishment of a goal that was set earlier.
When it comes to trading, it’s important to have proper expectations and a good understanding of the process so that you can set accomplishable goals. Novice and experienced traders should have different goals. What’s more, in order to succeed in forex trading, it’s important to set short term, mid term and long term goals for yourself.
The first priority for novice traders should be not to lose money trading. Most beginners lose money trading and get out of the business for good. The more experience a trader gets, the better the results will be. Ideally a long term goal should be to stay in the business for a long time and increase income through compounding. Compounding is a tried and true method actively used in the world of investing to increase wealth. Compounding helps the rich get richer by reinvesting their capital. On the other hand, compounding takes time.
When we start trading, most of us set very wrong goals for ourselves. We all want to get rich quickly trading currency pairs. The problem with this goal is that it makes us make mistakes. Wrong goals elevate greed and our trading positions become oversized. Which inevitably results in blown up accounts.
In the world of investing, increasing account balance slowly and steadily is more important than doubling the money overnight. It is less risky for investors and very attractive for this exact reason.
We believe that a successful beginner trader is someone who learns how to trade properly and in the process manages not to lose a trading capital to an extent that trading becomes unavailable for him/her in the future.
As a beginner trader advances and becomes a professional, success criteria changes. A successful forex trader is someone who manages to gradually increase the trading capital. Having a trading edge, managing risks and emotions is vitally important in this process.
As experienced traders become successful and show that their trading systems are profitable. The next stage is to manage bigger capital. Usually professional traders with low risk and steady profitable returns get hired by money management companies.
How to be successful as a beginner trader?
The biggest aim for a novice trader should be to develop a trading method, become consistent in his/her approach, manage risks and emotions and make trading an integral part of his/her life.
And on top of everything, not to lose the trading capital. In order to achieve these goals there are a couple of steps to take.
As a beginner, you should never risk a trading capital you can’t afford to lose. Unfortunately, some beginners sell their property and take out loans to fund their newly opened trading accounts. Trading is risky and the risks are especially magnified when you are still in the learning stage. Once the trading capital is gone, it’s very difficult to return to trading again.
Risks per trade should not be oversized. Professional traders only risk 1-5% of their trading balance per trade. It’s much easier to manage emotions and focus on finding the best trading setups when there’s only a small amount of trading balance on the risk.
In order to properly manage your emotions, you need to have proper goals. For instance, if your goals are to maximize your returns or pay your child’s tuition fees, you will most likely make decisions based on greed, revenge trade after a losing one and increase your risks. Having a proper goal means that you aim to become a professional and make Forex work in the long run. When your goal is to trade the right way, meaning only trade the best setups, manage your risks and spend a good amount of time analyzing the markets, the results will be much better. In addition to greed and revenge trading, novice traders must learn how to control their fears and overcome laziness.
Make a trading plan
A major forex success formula is developing a plan and following it with discipline. A vast majority of successful traders have a plan. Trading plan makes decision-making much easier as there’s less room for being innovative. Trading plan helps investors become more disciplined. A trading plan should include which assets to trade, what should be the risk to reward ratio, when to trade, when not to trade, what to do during the drawdowns and so on. Keep in mind that every trader should make his/her plan as traders come in all shapes and forms. What works for one trader will almost certainly not work for the other. Some traders like to think more and plan better, for them position trading makes much better sense. Swing traders open and stay in the position longer than a day. Intraday traders are more actively trading and opening and closing orders within a day to avoid swaps. Some high frequency traders make more than 100 trades per day. In addition, there are fundamental and technical traders. As you can see, every trading style needs a plan that best suits certain individuals.
Balance work and life
As we’ve already discussed, in order to become a professional trader, novice traders should be planning to stay in the business in the long run. In this process, balancing the amount of time you will be spending on your financial education, work, research and private life is important. Generally, a well put together trading plan should also include the amount of working hours and amount of non-working hours and they should be well-balanced. Having a proper rest after work is important to successfully trade forex pairs.
How to be successful as a professional trader?
Professional traders’ goal should be to make money and maximize their income in the long run. Professional traders know that there are many investors searching for individuals with a good trading track record. Which means low risk and steady rewards. However, good past performance doesn’t guarantee the same results in the future. The reasons are simple: market conditions often change, what has worked before, might not work in the future. In addition, it’s more difficult to manage larger amounts of money. Also, there’s a psychological pressure when investing other people’s savings in the Forex market. Even though these challenges arise, traders with a good track record have the best shot at managing larger capital and increasing their profits.
A successful professional trader has the ability to increase income by reinvesting his/her profits. In the world of investing 72 rule is a well known formula designed to calculate the number of years it will take to double an investment when the rate of return is steady and clear. For instance, to double a 1,000 USD with a 12% rate of return, it will take traders 6 years.
The most successful Forex traders
As already mentioned, success can mean very different things for different traders. It all depends on what goals they have. If we are talking about the greatest examples of forex trading success in terms of sheer numbers, there are certain individuals worth mentioning:
George Soros is a very famous or to be more accurate infamous Forex trader. He is known as the man who broke the bank of England. In 1992 Soros short-sold the British Pound Sterling and made around 1 billion in profits. This amazing trade has made Soros a legend and gave him the most successful trader’s title. George was born in 1930. He gained experience by working at a series of financial firms. And later in1973, he established Soros Fund Management.
Soros has said that he is only rich, because he knows when he is wrong. Acknowledging your mistakes and acting on them is one of the best traits of a Forex trader.
Stanley is connected with George Soros. He has worked with him for about 10 years at Soros’ quantum fund. Stanley says that he has learned a lot from Mr. Soros.
Stanley Druckenmiller has founded a Duquesne Capital fund management and successfully handled billions of dollars. He managed to become one of the wealthiest traders in the industry. Nowadays, his net worth is estimated to be at 3 billion US Dollars. Stanley’s strategy was to cut losses short and preserve the funds. And when the trades were going in the predicted direction, he was aggressive and was increasing the position sizes. Keep in mind that not all of the trading styles and approaches can be successfully replicated by retail traders. Institutional traders have deep pockets and their presence is felt when they are moving billions of dollars. Small retail traders can open positions during the least liquid trading hours and feel confident that their orders will get filled.
After graduating from Wharton School of Business Andrew Krieger joined the Bankers Trust. He managed to impress the investors so much that they gave him permission to have a 700 million US Dollar limit. Andrew Krieger is famous for shorting the New Zealand dollar, which fell by 5% and made 300 million USD in profits.
Bill Lipschutz is a legend among traders. He received an inheritance of 12,000 USD and quickly turned it to 250,000 USD by trading. Soon he lost it all by making a single mistake. Later he joined Salomon Brothers firm and was making 300 millions USD per year for the company. In 1995, Bill Lipschutz established Hathersage Capital Management. Bill believes that the key to success in Forex trading is to capitalize on your right decisions and make the most money out of them.
The main takeaways
To sum everything up, there’s different criteria for success for each and every trader. The reason is simple, some traders have more funds to manage, some have more experience than others. Some are scalpers, swing traders, intraday, high frequency traders and the list goes on and on. Success for a beginner trader is when he/she manages not to lose money while still learning. Becomes good at managing the risks, emotions, develops a profitable trading strategy and learns from own mistakes. Success for a professional trader means safe and steady profits. Increasing position sizes by increasing the total trading capital gradually. A professional trader that has a good trading track record can easily find investors or increase the funds through reinvesting. Among the top traders that have made the most amount of money are George Soros, Stanley Druckenmiller, Andy Krieger, Bill Lipschutz and others.
FAQs on how to achieve success in Forex trading
How successful are forex traders?
The level of success depends on what stage a trader is. A beginner trader is considered successful if he or she manages not to blow up trading accounts while still learning. A professional trader is considered successful if he or manages to build a good trading track record that will help attract investors or grow income by compounding.
Who is the most successful forex trader?
Among the most successful Forex traders are George Soros, Stanley Druckenmiller, Andy Krieger, Bill Lipschutz and others. George Soros is the leader when we take into consideration his trade that made him a billion. Soros is known as the man who broke the Bank of England.