How to maximize your effectiveness in Forex? Many traders wonder whether there is a special recipe for success in Forex. Do you have one?
AtoZForex – Many traders are searching for the Holy Grail in Forex trading. Yet, I believe there is no such thing. Everything comes with experience, hard work, and continuous improvement. I am not excluding the importance of luck in Forex market, you may be having a series of lucky trades, where someone is seeing only losing trades. However it may be, there is no perfect recipe for victory in Forex market.
How to maximize your effectiveness in Forex?
Nevertheless, there are some things that can significantly improve your position in Forex as a trader. Today, we look into three M’s of trading in Forex and how to properly utilize each of them in order to grow sustainable as a professional Forex trader. Mind, Method, and Money: what should you pay attention to?
The idea of 3 M’s of trading is coming from a book called Come into My Trading Room by Alexander Elder. All three M’s of trading are equally important in trading. You can see them as three pillars of trading and the base for your trading plan. I believe that all of them are essential, and without one of them, the trading backbone will not be complete. It is vital to ensure all three Ms are working in sync in order to become a successful Forex trader.
As you might have guessed, the Mind implies hard work on your psychological behavioral patterns that will assure your stability during the trade. Moreover, this M must ensure that you are able to keep calm in hard times and can think properly in a highly volatile market. Everything in Forex trading begins and ends with your trading mindset.
One of the key points about professional trader mindset is an ability to control oneself. In case trader is not able to control his/her emotions, most of the trading can be distorted because of the temptation to trade.
The understanding of what you are doing in Forex market and what you are risking needs to be the first step of getting to Mind in Forex. Moreover, it is vital to acknowledge that it is very easy to lose in Forex. Also, getting to the Mind of 3 M’s of trading will require understanding the risk in Forex and acting in accordance with its understanding.
The next part of the answer for our question ‘How to maximize your effectiveness in Forex?‘ is Money. Here we talk about management of money, including the risk and reward management in Forex. It is very important to learn how to manage your profits, or reward and your risks. Where in the previous M we needed to accept the risk, here we dig deeper to actually build our trading plan in line with risks we are taking.
Moreover, managing your money is also closely connected with a professional trader mindset that we were talking about. Let’s put the Money management into two key points:
- You need to ALWAYS think about risk before reward;
- You need to know what your risk-to-reward ratio is and you should never exceed this balance.
- You need to know how to place stop losses in a proper way. Position sizes also matter a lot.
- You need to understand how to place profit targets
- You need to know how to calculate the risk-reward on a trade.
We can think about money management as the key connection between the three M’s. In case your money management is not in place, your professional mindset will be useless. Your third M, the Method will also be irrelevant if you cannot properly manage your money.
Getting to the last M, the Method, here we talk about HOW you trade the Forex market. The effective trading method will not suit everyone, thus, I believe you need to have your own specific trading plan.
Your trading method should meet your needs as a trader. In order to understand whether the trading plan is working for you is to test it. Try utilizing it a couple of months and see the results of your trades. There are millions of trading strategies out there, and you might test a lot of them. However, in the end, you might even find out that one trading strategy is effective and another suits your lifestyle. The key to success – never stop trying.
All in all, it is fundamental to stress that all three M’s are inseparable. One cannot be efficient without another.
Do you know how to maximize your effectiveness in Forex? Think we missed something? Let us know in the comments section below.