In many trading-related books we often see the markets become associated with a jungle. And why not? Every day traders battle it out with animal references such as the bulls and the bears, the hawks and the doves, and the wolves and the sharks.

This is likely why traders love referencing themselves as the modern-day hunters. Some say that they’re like the cheetahs who catch their prey using sheer speed while others see themselves as crocodiles who lie in wait for a big, fat catch.

So what does it take to become a successful hunter? And for traders, what does it take to consistently make pips?

1. Know Your Prey
When a lion wants to eat a buffalo, it doesn’t attack the first one it sees. It studies and analyses the herd’s behavior patterns and looks for its potential weaknesses. By the time the lion is ready to strike, it already knows what makes the herd tick, where to attack, and how to get the fattest buffalo with the least amount of effort.

Like in the lion’s case, it’s essential for traders to collect data before striking. Before you enter a EUR/USD short, for example, you must first know which factors can influence its price action and which levels present the best reward-to-risk ratios.

Ask yourself questions such as “Which economic reports does the pair usually respond to? When does the pair move the most? What factors can shift its current trend?” Collect data and turn them into probabilities.

2. Wait for the Best Opportunity to Strike
Once you’ve gathered information on your prey, use it to your advantage by striking at the best possible opportunity. After all, hunters usually just get one chance.

Maximize your gains while minimizing your effort and your risk. The difference between an average and a skilled hunter is that the skilled hunter waits until the odds are overwhelmingly in his favor.

3. Execute According to Plan
For traders, the time to think about what could happen and what you would do in an alternate scenario has passed. In this stage, it’s all about just doing what needs to be done.

Be quick, aggressive, accurate, and confident in your execution. Don’t let fear and greed get in the way of your performance. Of course, it would help if you’ve already back and forward tested your trading strategy and that you’re confident that the numbers will add up in the end.

4. Monitor and Adjust
At any given day a leopard could encounter an extraordinarily resilient gazelle or a similar scenario that could change the outcome of its attack. Should the leopard use a different approach? Or should it abort its plan and wait for another opportunity?

If the actual trading scenario is different from the one you initially envisioned, then it’s time to make adjustments. The first step is to consult your play book for any alternative strategies you might have written or executed before. Then, weigh the outcomes of your options.

Should you cut your losses or let your profits run? Should you add to your position or close it and wait for another opportunity? Whatever your decision is, remember to choose the path of minimum risk and maximum gains.

5. Learn and Earn
The best hunters are ones that have learned the most from their previous experiences. In the jungle, you eat what you kill.

As in the jungle, the consistently profitable traders are not the ones who have the most trades, but those who have learned from their experiences and continue to improve their skills with each trade.

One way to speed up your learning process is to engage in deliberate practice. The process of journaling, recording, and reviewing your trades turns one experience into many and makes it easier to correct your mistakes.

Surviving the Forex jungle doesn’t require expensive tools or a fancy trading course. Sometimes it just takes simple processes such as the one stated above, repeated day in and day out, to become slowly but consistently profitable.

By Dr. Pipslow

Source: BabyPips

Images: Vera J.

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