One of the reasons why individuals are attracted to the forex market is that they hear about the kind of money that experts are drawing from fluctuating forex rates and want to get in on the action as well. However, what these individuals fail to realise is that expert forex traders are a class above the rest of the crowd active in the forex market.
While it is true that they do not do anything different from other forex traders, it is also true that the style with which they do what they do is completely different. Essentially, expert forex traders know that in order to beat forex rate fluctuations, they will need to have some special organisational and psychological skills. Here is a list of things that expert forex traders do.
The most important quality that expert forex traders possess to beat the volatility inherent in forex rates is emotional discipline. The reason why this is important is that without emotional discipline, a trader can end up making some very serious gaffes on the forex market. These mistakes can easily result in the whole account equity of the trader getting blown to bits.
Another thing that is common amongst all expert forex traders is that they know how to use price action analysis in the forex market to profit. Price action analysis is, in simplest of terms, the analysis of forex rates and their specific trends.
Price action analysis is considered to be the simplest strategy that any trader can adopt in the market. More importantly, prevalent wisdom states that price action analysis incorporates every instance of cause and effect that is relevant to the forex market.
Reward to Risk Ratio
Reward to risk ratios are mainly the comparison between the risk inherent in the trade and the kind of rewards it can yield. Expert traders make it a point to never invest against the reward to risk ratio that they are targeting in the market. At the very least, expert forex traders do not invest in any trade that offers them a reward to risk ratio of less than 2 to 1.
Drawdown is something that most expert forex traders also worry about because fluctuations in forex rates can sometimes result in massive losses. They know exactly how much drawdown they can stomach with each trade as well as the total drawdown that their total account equity can handle without becoming severely limited.
Expert traders maintain their reward to risk ratios and special order placements in terms of what their analysis of forex rates tells them. Instead, when it comes to managing risks, they simply modify their position sizes to suit not only the specific merits of the trade but also the dollar risk they are willing to take.
Finally, you should also know that expert traders never attempt to beat forex rates without a well-defined and efficient forex trading plan. This trading plan allows them to follow everything in a structured and stable manner as opposed to vacillating from one thing to another.