Retail forex broker OANDA has surveyed its elite traders to uncover what is most critical to their trading performance and provide tips for new traders as we move into 2016. The findings also challenge misconceptions about the risk appetite of retail FX traders.
When asked about the key attributes of a successful trader, being risk aware was the first choice for OANDA’s top traders. 81% cited it as a top three trading quality, with the ability to read charts and knowledge of macroeconomics in at second and third place (taking 56% and 50% of the votes respectively). Being aggressive was the least favoured option, chosen by only 14% of those surveyed.
This attitude carried through to tips for new traders, with 70% of respondents saying risk management was the most important skill for new FX traders to develop. Experienced traders recommended that new traders focus on discipline, creating a plan, being careful of excessive use of leverage and focusing on cash management. Respondents also reported using smaller trade sizes and stop losses to manage risk when they first started trading.
The importance of discipline and risk management does not affect bullishness on returns. 38% of OANDA’s top traders are targeting 20+% returns and 71% are targeting 10% or higher. The survey also reports that traders increase their return targets as they gain experience. When starting out, only 31% of the elite traders targeted 20+% returns and 62% targeted 10+%.
According to Drew Izzo, CMO at OANDA,
The clients we surveyed are our top traders as measured by longevity of accounts and returns over that period. The results show that success and risk management go hand in hand. Global regulators and policy makers are looking to put risk management and discipline at the heart of the FX industry. Our best retail traders are already doing this. We have always encouraged a healthy attitude to risk through lower leverage levels, educational initiatives and providing access to the necessary tools. If the industry is to make a resolution as we move into a new year, perhaps it is worth looking to the traders themselves as, for them, the writing is already on the wall when it comes to the importance of risk management.