The key trait of all successful traders is their ability to stick with their plan and move forward with a disciplined approach. This is what we refer to as trading discipline and it is very much essential to succeed in the forex market too. But how can you develop trading discipline and become a profitable forex trader in the long run? This beginner’s guide includes all the steps that you need to follow to become a disciplined trader in the dynamic forex market.
- Set Clear Trading Goals
The first step for developing trading discipline is setting clear and realistic goals. The goal you want to attain as a forex trader is the destination that you want to reach at the end of your trading journey. However, setting one big goal is not enough to build trading discipline as it takes a lot of time to attain these long-term goals. Meanwhile, you need to set some smaller goals which keep you on the right track while navigating the volatile currency market.
For example, most traders target to earn a specific number of pips at the end of a trading session. They will be planning the entry and exit points of the trades only after counting the number of pips that they want to catch in that trade. Pip calculations can be complex when you do it manually and an automated pip calculator is the perfect tool for correctly estimating the pip value and deciding the target profit of a trade accordingly.
- Devise a Solid Trading Plan
The second step for developing trading discipline is creating a sound trading plan. The goals that you have set earlier should be attained by following a well-defined plan that specifies your trading style and strategy. One thing to consider while devising your trading plan is the amount of risk that you can tolerate as a trader. Because different strategies have different levels of risk and this also applies to trading styles. Hence, you need to choose an approach that aligns with your trading goals but also matches your risk appetite.
You should also consider the amount of time you can spare for market analysis and trading. For instance, short-term strategies like scalping and day trading require more time as you will have to monitor the market all day long to find suitable trading opportunities. For part-time traders, trading styles like swing trading and position trading will be ideal as they take less time in comparison. So, make sure your trading plan matches your schedule and keep it simple to avoid any kind of confusion.
- Master Risk Management
The success of your trading plan or strategy greatly depends on your knowledge and skill level. One skill that each and every forex trader needs to master for success is risk management. Hence, the third step for developing trading discipline is devising a risk management plan. Setting a favourable risk/reward ratio and optimal position sizing are some of the key aspects that you need to consider for controlling your exposure to market risk.
You need to calculate the amount of risk that you are taking in a trade and for that, you can use tools like trading calculators. You need to adjust the stop loss and take profit levels after calculating the potential profit with a profit calculator. You should also limit the amount of leverage that you are using for a trade as excess leverage increases your risk. To avoid the risk of overtrading, you need to limit the number of trades that you enter.
- Follow a Trading Routine
Traders who follow the same trading routine on a daily basis will find it easier to develop trading discipline. Because having a routine keeps you on the right track and you will become consistent in dedicating enough time to monitor the market and identify trading opportunities based on your strategy. You will have to set fixed trading hours to focus on trading based on the trading session that you have chosen. You should be active during session overlaps as that is the perfect time to execute trades with ease.
Even those who are planning to scalp or engage in day trading don’t need to watch the market all day long as that will be very tiring and can lead to burnout. You need to limit your screen time but also make sure that you show up even when you don’t have the motivation to trade. After all, discipline is the ability to perform tasks even when you don’t feel like doing it. But, you should also be taking breaks and taking your time to recharge to give your undivided attention during the trading process.
- Indulge in Continuous Learning
When you are in the initial phase of your trading journey, you will be dedicating a lot of your time and effort to learning. But once you get some experience in trading, you will slowly stop learning which is not the best approach in the constantly changing forex market. You need to keep yourself updated about all the latest developments in the world of trading and for that, you need to indulge in continuous learning. Even experienced traders can learn a lot of new information by interacting with other traders who follow a different approach altogether.
You need to accept the fact that no strategy can work forever in the dynamic forex market and there are times when you will have to modify your strategy or even switch to another strategy to adapt to the market situation. But at the same, you need to follow a disciplined approach without breaking the rules that you have set for yourself. Whether it is about using basic tools like currency calculators for converting one currency to another or using advanced tools and indicators for confirming your analysis, education is the key to success in the forex world.
- Manage Your Emotions
Emotions are often referred to as the number one enemy of a trader as we often make poor trading decisions when we are overpowered by emotions like excitement, stress, fear and greed. It would be impossible to not feel any of these emotions while trading with real money as our minds will always be on the edge when there is a possibility of a profit or loss. You need to refrain from making impulsive moves and make conscious efforts to trade with a calm and composed mind.
We don’t have much control over the end result of trading being a win or loss but we need to control our emotions in a way that does not interrupt our rational thinking process. Being too stressed about a situation will not solve the problem but it will surely affect your performance as a trader. Learning about trading psychology is a key step for developing trading discipline and patience.
Bottom Line
In the end, developing trading discipline is a challenging task for a beginner but you can make it easier by following the steps that I have described in this guide. Setting clear goals and sticking to your original trading plan while prioritising risk management is the essence of trading discipline.
