Being a forex trader is similar to being self-employed, even if it’s a side hustle. You will be the only one responsible for all the tasks and decision-making that come as a part of the trading process. As someone engaged in online trading, you will get complete freedom to choose your path and opt for the best course of action for yourself. Being an independent forex trader can be highly rewarding, but you also have some challenges to overcome while you board for a trading journey on your own.
In this article, you will read about the top methods for self-management that all forex traders should know before entering the dynamic currency market.
How does self-management allow you to trade better?
Before we get into the top methods for self-management, you need to understand how self-management allows you to trade better. Self-management is a very beneficial and essential practice for successful trading. The techniques that you use to manage your trading account and activities will eventually determine the results that you get in the end. Adopting the right methods for self-management will make the trading process easier. It is more about being organised and systematic with every step you take so that you can easily cross the hurdles you come across.
To be honest, trading is a tough task for beginners, but efficient self-management can bring down the difficulty level to a great extent. Now, let’s look at the benefits a forex trader can avail of with proper self-management methods.
- Makes you adaptable to the changes, which makes it easier to survive in the volatile market conditions.
- You can easily spot the areas that need improvement and become a better version of yourself, not just in trading but also in all other aspects of life.
- Promotes self-assessments regularly, making it easier to implement changes and fix things as and when needed.
- It prepares you to face all the career-related challenges like a professional, pushing you towards self-growth and fulfilment.
- Reduces stress as you are able to attain a healthy work-life balance with efficient time management.
- Makes you better at planning, analysis and decision-making, which directly boosts your performance.
Top Methods for forex traders to excel at self-management
Self-management starts with self-awareness, as you need to have a clear idea about your knowledge and skill level to find the best ways to manage your trading activities. You should know about your strengths and weaknesses as it allows you to frame a strategy that fully aligns with your trading personality. Only then do you get to reach your true potential by polishing your skills and working on your shortcomings. Now, let’s look at all the top methods you can follow for excelling at self-management in forex trading.
- Decide the aspects that you want to focus on with self-management
Firstly, you need to decide what areas or aspects of trading you will be focusing on while getting into self-management. You need to be clear and specific about what results you expect while working on these areas. Being goal-oriented is essential to avoid any sort of confusion. The goals you want to achieve as a trader can be categorised into 4 groups.
- Time management – Time management is something that many traders struggle with since the forex market is open 24 hours a day and 5 days a week. But you need to decide how much time you would devote to planning, analysing and executing trades. You need to find answers to a number of questions, like Which trading session would be the best match for your time zone and what time frames should be utilised for executing your strategy with ease. Setting time-bound targets and making a to-do list on the basis of priority and more can be done to make the best use of your valuable time.
- Money management – Money management is a key skill required for forex trading; attaining your trading goals won’t be possible if you fail to manage your funds. It is about managing the funds in your trading account and how you plan to manage your finances in general. You should spend some time calculating the risk you will be taking while being exposed to the fluctuations in the currency market. For this, you can use different trading calculators, which cover different aspects of trades like lot size, leverage, pips, profits and more. This way, you can prepare yourself to manage the rest of the processes in a professional manner.
- Emotional management – Managing your own emotions comes as a part of the trading psychology, which dictates our decision-making process to a great extent. Putting too much emphasis on our emotions will not be the right approach in forex trading. You are bound to experience many emotions while engaging in trading, but being able to control them makes you powerful as a trader. Practising mindfulness and meditation are effective in attaining emotional balance before trading.
- Self-care – Trading is a stressful activity at times, and you will need a lot of energy to show up every day and do your best at the trading table. Hence, taking care of your body and health is essential to restore your energy throughout your trading journey. Getting enough sleep, exercising and following a balanced diet are important for staying healthy and energised. There is a high possibility of feeling burned out as a trader, and taking timely breaks allows us to perform better.
- POMC approach
POMC is the abbreviation for Plan, Organise, Motivate and Control, which is a powerful approach that is followed for getting things done in a feasible manner. In the planning phase, you will set clear goals and targets that lead you to the results you want from trading. Organising is about setting everything in a way that these goals become achievable.
Motivating yourself is important to stay on track and work towards your goals as a trader. You may experience failures and setbacks throughout the journey, but persistence and discipline allow you to bounce back and resume your work. Controlling is about comparing the results with the expectations to spot any deviation, and then you can see what can be done to get back on track.
- Preparing your toolkit
Trading in the forex market has much to do with technology, and you need to prepare your trader’s toolkit before proceeding. You need to make a checklist of all the essential trading tools you would need to access and trade in the forex market with an edge. The primary tool you would need as a forex trader is a sophisticated and advanced trading platform like MT4 or MT5. MT4 is a basic version with essential features and tools, while MT5 is upgraded with added tools and features to provide a superior trading experience. Millions of traders use these platforms, and you can see which would suit you better.
- Enhancing your skills
The 4th method for self-management is related to skill development, an ongoing process. Our skills can always be enhanced with systematic studying and practice. This is applicable to all jobs and professions, including forex trading. The best place to polish your skills as a trader is a Forex demo account. A demo account gives you a risk-free space replicating the real trading account, and you get to trade with virtual funds instead of real money. Here, you can freely experiment and try out different techniques without being stressed about potential losses, as the trades you place on a demo account have nothing to do with the actual market.
- Self-audit and taking corrective actions
You must have heard about the auditing procedure to evaluate the performance of a business entity at the end of every year. Such periodic audits reveal the real situation of a business and whether it is doing well enough to keep going for a longer duration. Since forex trading is also like a self-managed business, you must conduct self-audits regularly to assess your performance and take corrective actions when a deviation stops you from attaining expected results. The actual purpose of self-management is to optimise your performance as a trader, and reviewing and evaluating your own performance from time to time is essential to fulfilling this purpose.
Summary
To summarise, self-management is a key step that you need to take to upgrade your performance and grow as a trader. Without self-management, you will remain stuck in the same place forever, limiting your own growth. Those who skip this step may still survive in the market if they have a good enough strategy, but long-term success and improvement will not be possible unless you take some time to work on self-management.