I recall there are 3 pillars that you must have to be a professional Forex trader that is a profitable one who takes the money from the Forex market. Those 3 pillars are regarding how you manage your money, how you behave when you are in a losing position, and how you analyze the market. The 3 pillars are money management, trading psychology, and analysis where I got this from the book Trading for a Living: Psychology, Trading Tactics, Money Management written by Dr. Alexander Elder (Elder, 1993, p. 5).
Now let us take a look at what these 3 pillars do a significant job for your trading account especially when you trade in the Forex market.
Money Management
Basically, money management is very important to know and apply if you want to have a long-term Forex account. Imagine if you are having a big chunk of money right now and you do not know how to manage it, you could guess what is next, right? Yes, that big chunk of money would be washed away like nothing and you gain nothing from it because you do not know how to apply money management.
It is the same in your Forex trading account, if you have a big amount of money loaded into your account and you do not know how to manage it, then, be prepared to be washed away by the market. For example, you just deposit your account with $1000 and you open a long position on EUR/USD pair, but what is bad is that you have no plan for money management like risk-to-reward or you do not even know when to exit the market that would eventually lead your winning position into losing position.
Trading Psychology
Aside from money management, trading psychology is also important to have if you want to survive in the Forex market and take a glorious profit from it. This psychology thing is like how your mindset work toward something that is happening to you and that mindset of yours would then determine your behavior when there is an act surrounding you like when someone scolds you, you choose to scold them back or pretend not to hear it.
By the example above about psychology in your life, it could be applied to how you react toward the action of the Forex market against you. For example, you have a good system that would make you profit realistically that could gain 20% in a year (or even more depending on the market conditions) yet whenever you encounter a loss you could not stand still and then look at the market trying to rationalize that your system is bleak and you hop onto the new system by closing that losing position. then, slowly but sure you do not realize that you have repeated that for 10 times of thinking your system is bleak and hop onto another "perfect" system that eats away your money.
However, it would be different if you have strong trading psychology in which you trust your system and see losses as normal processes of trading. When you do that, your behavior toward the Forex market has become consistently unchanged and that consistently act would lead you to a constant result that you want and thus you may reap your reward later. I remember what Rayner Teo said in his YouTube video (I forgot which one) that "a consistent set of actions lead you to a consistent set of results". That is why having strong psychology of trading would be an advantage to your trading account.
Analysis
This analysis refers to how you analyze the Forex market to determine and anticipate the market movement. As far as I know, there are two types of analysis in which you could use this to analyze the Forex market, that is, fundamental and technical analysis (there is one more called sentimental analysis but I have not delved into it more). As I already wrote in my previous post, technical analysis refers to the price movement on the chart which you could see like candlestick patterns to determine know what is the market current conditions (Andre, 2022).
On the other hand, there is a fundamental analysis in which this type of analysis is focusing on economic data such as the impact of economic events that would change the course of the Forex market, such as news, global events that take place in the world, other macro and micro-economics (Andre, 2022). Fundamental analysis, in my eyes, is important to know as this analysis has a high accuracy than the technical analysis. For example, if the USA suddenly takes action to restrict trade from the EU, then it would impact on EUR/USD pair.
Conclusion
In short, there are 3 pillars you have to master before you could be a profitable Forex trader. These 3 pillars are money management, trading psychology, and analysis that have to be strong in strengthening your mastery. It is like a building that has pillars that would support it to stand strong and so, in Forex trading you have to have your own system which consists of these 3 pillars that would support your Forex account to survive in the market for a long time.
Written by Andre I.
Reference
Elder, Alexander. 1993. Trading for a Living: Psychology, Trading Tactics, Money Management. New York: John Wiley & Sons, Inc.
Andre. 2022. How To Analyze The Forex Market?. Retrieved from Forex Jed. (Accessed 17 January 2022): https://forexjed.blogspot.com/2021/12/how-to-analyze-the-forex-market.html
Teo, Rayner. His YouTube video.