It would be smart to open this article by defining what is meant by a 'professional Forex trader'.
On the one hand, a professional trader is somebody who has a day job at the bank, an investment firm, a trust fund, or a company. They get paid for working hours just the same as everyone else with a day job.
Let's call these people hired traders. What characterises those traders is that they are paid to manage funds other than their own – and add profits to their portfolio instead of their wallets.
These are professionals by definition, since they receive a professional Forex trading salary.
On the other hand, a professional trader is also a person who makes a living from trading, whether they're additionally employed elsewhere or not. Let's call these people private traders.
Such a trader quite often has the experience of being a hired trader, or is in the process of building up a track record to become one. Private traders can be called professional traders as well, but in this case, the term 'professional' describes an approach, rather than an entry on a CV. In other words, a private trader hires themselves.
Each can make very different levels of professional Forex trader income. But ultimately, a Forex trader is somebody who is trading, profitably and consistently.
So what does it take to become a professional Forex trader? Essentially, it all comes down to creating productive routines.
First of all, a routine is a good thing despite the somewhat negative connotation that the term carries. Routines have less to do with chores and more to do with habits that save time and effort.
Did you know that people who don't have to choose what they have for breakfast each day, are generally less tired by afternoon? Routines are there to save you from constantly re-considering what you should only have to consider once. The truth is that making decisions is hard work for your brain. Remember how tiring those college exams were?
Good results come from optimising performance and conserving resources. This applies to life as much as it does to trading.
What's the first thing a professional Forex trader should do in the morning? Well, they should start the day well-rested, get the body moving, have a healthy breakfast, and get to work.
Most professional Forex traders start the day early. The years of human evolution have tied our biorhythms to the movement of the sun and sticking to them will reflect positively both on your health and your trading.
Speaking of health. Your brain – vital to trading for its analytical and decision-making capabilities – requires a lot of oxygen. So make exercise a regular part of your morning routine. Do whatever you need to do to get your blood flowing. This could be jogging, cycling, pushups, or situps. Aside from reducing a chance of a heart attack at the age of 40, even a five-minute regular workout greatly improves blood circulation and oxygen supply, thus improving brain activity.
Having a nutritious meal is the next important step. Your brain uses about 40% of all the energy from all the food that is consumed. Make sure you eat a good breakfast, it will help your trading performance.
In the life of a Forex trader, the morning routine is vital in setting a professional tone for the rest of the day.
In professional Forex trading, traders are most easily defined by the time frames they trade.
Position trading means trading over the long term, with trades typically open across months or years. This means analysing daily time frames, whilst anything lower will generally be irrelevant market noise for the position trader.
Swing traders have their trades open for days and weeks. Daily and 4H time frames are their favourite. In rare cases, the hourly time frame is used to research areas of price action – but it is not the primary decision making interval.
Day traders only trade within a single day session. They don't tend to action overnight trades because leaving charts unattended for prolonged periods of time is usually inconsistent with money management rules used by intraday traders. It's simply too risky.
Finally, we have scalpers. This type of trader specialises in trading within the lowest time frames. Fifteen minutes is usually as high as they ever go.
Why is knowing your time frame important? Because it defines how often your charts update and how often you should be checking them.
Unlike professional traders, beginners usually can't take their eyes off price charts. The problem here is that overanalysing or simply counting pips will quickly cause mental exhaustion. Professional traders make a conscious effort to limit their exposure to the market. Anton Kreil – one of the most successful traders of our generation – could not have framed it better than saying: 'If you watch every tick, you will trade like a d*ck'. Mark his words.
How do professional traders limit their exposure? First of all, by having a limited group of markets they follow. For example, they'll analyse currency pairs that are most traded when they are awake. Secondly, by knowing exactly what they are looking for on a chart.
To raise your Forex trading to a professional level, take these initial steps:
1. Decide what type of trader you are.
2. Identify the markets you are interested in.
3. Understand the strategy you are using and know what to look for.
The majority of traders prefer trading higher time frames to lower time frames. There are fewer signals to interpret, less time at the screen and less market noise. This often leads to higher probability trades.
What's ironic is that most people begin trading with the hope of creating more free time for themselves. Instead, they often end up tied to the screen for 40 hours per week obsessing over their trades.
That's not the real currency trader life. In fact, that's no life at all. Professionals let the market do the work, whilst using periods of rest and recovery to optimise later performance.
A long-term trader starts by order maintenance. This involves checking how active trades are performing. Depending on overnight market developments, a trader might adjust stop-losses or take-profit orders.
Remember, an overnight trader is either a swing trader or a positional trader. This means that there is no point in checking the markets more than every four hours, or even more than once a day.
If any trades closed overnight, a professional trader will document it in a trading journal, reflecting on profits or losses.
Updating a trading journal certainly separates the rookie traders from the seasoned professionals. Doing so makes it easier for a trader to evaluate their overall performance and strategy. It also allows traders to get a sense of the bigger picture in terms of profits and losses. Viewing trades in batches, rather than individual transactions, is a much better way of evaluating performance and strategy.
The easiest way to become a professional Forex trader is to trade over the long-term. One benefit of this approach is that a trader will have more flexibility when it comes to checking price charts. They can simply afford to check key data at a time of their choosing.
However, intraday traders and scalpers have to monitor their price charts much more closely. This is because they trade within very narrow time frames, where a slight fluctuation in the price can change the outcome of a trade.
In either case, the lesson here is to learn when the market actually requires your presence. When it is not required, it's best that traders stay away from the markets. Professional traders are very good at sticking to these parameters – make sure you develop this habit too.
As a result of this habit, professional traders never chase the market either. Once the trading time is over, they retire for the day, at least from actively trading the markets. They might still carry out trading research, but they certainly don't gaze endlessly at their price charts.
For the remainder of the day, a professional trader should do the utmost to look after themselves to stay happy and healthy. This means they'll be able to resume trading, whenever that might be, in the best frame mind.
To sum up, the life of a currency trader consists of routines that are designed to reinforce productive habits that optimise performance and conserve resources. Keep the following points in mind moving forward:
A professional trader knows their trading style, markets, and doesn't waste time overanalysing.
A professional trader keeps a physical or digital (but not a mental) track of their performance and considers only their weighted long-term results.
A professional trader knows when to remove themselves from the market and let their strategy do the work.
A professional trader doesn't let their profession get the best of them. They trade to support their living. They don't live to support their trading.