Know Your Trading Style

The first of several facets to trading with confidence is having an analytical methodology and strategies which fit the trader’s personality. Each trader has a different view on how things work and what resonates when it comes to analysis. Having a firm understanding of what works is extremely important as well as being consistent in application. Whichever type of analysis is selected, traders should not overcomplicate matters by adding components which could lead to confusion. Simple and consistent application of indicators – support and resistance, trend-lines, Elliot wave theory will lead to traders trading with confidence.

Pin Down A Trading Time-Frame

Time frame filters down from the trading style or strategy employed by the trader. Different trading styles generally relate to specific time horizons. For example, a position trader will target long-term time frames for each trade. Time-frames completely depend on the trader’s mentality and the amount of time they can dedicate per day. 4-hour time frames can be a good place to start off as it avoids market noise and does not require constant monitoring. This comes back to sticking to a trading style which will prevent traders from jumping around between time frames.

Focus on a few currency pairs

Know the markets or currency pairs which are being traded as per the strategy. Keeping the pool of instruments/markets small is always a good idea. Not all asset classes or even instruments within an asset class move the same, they have their own characteristics. Knowing the behavior of this small universe of symbols will give you more confidence when trading.

Calculate Your Risk Tolerance

Trading with confidence has strong links to risk management and understanding tolerance for risk. This is perhaps the most important facet, as it keeps traders steered towards taking the proper amount of risk per trade to prevent traders overriding analysis with emotion based on a lack of acceptance of the risk per trade. Risk management trumps analysis.

Focus on Process Not Outcomes

Focusing on the process, not the results will allow traders to gain greater confidence whilst trading. This requires patience to refrain from primarily focusing on the end goal. One way to do this is to keep a checklist, whether on paper or mentally. This will help steer traders towards the trades which suit the trading plan and prevent traders from entering harmful trades. It also helps deviate focus on the profit/loss (result) and maintain objectivity. In addition to the above, focusing on process-orientated goals will aid traders in remaining organized in relation to the trading goals.