What is a competitive advantage?
Competitive advantage is a way for a company to become a market leader, earn high profits, and share them with stakeholders. The company achieves it by optimizing the production of goods or providing services better than its competitors. So how can Forex traders achieve a competitive advantage over other traders? First, you must remember that not all traders finished Harvard business school, and second, 99% of traders are not math geniuses. In the 21st century, using new technologies and adapting fast is essential.
Not a Strategy
Many try to present a competitive advantage as a special strategy. As it’s something that you can buy and apply to your daily trading to be one step ahead of other traders and earn huge money. It's a delusion.
Trading strategies are constantly changing. They cannot work the same under various conditions. You must admit that what can be successfully applied to a volatile market will not bring profit on a sideways chart. Then how should you trade if no strategy works perfectly?
The answer is simple. You need to adapt. It is the ability to adjust to changing conditions that will make you a cut above the rest of the traders.
Strategies Become Obsolete
The more popular Forex becomes, the more sellers will try to promote their “unique strategies” that will provide you until the end of your life. Unfortunately, many novice traders believe them as they come to trading for quick and easy profit.
In my experience, such strategies work optimally for a maximum of a year or two. Most of them fail to stay profitable for more than a few months. In conditions of high volatility, which began to dominate the market in 2020, the strategy should be analyzed and improved at least once a month or even more often.
It is difficult for beginners to adapt their trading systems. Especially if they haven’t acquired the appropriate skills. If there were no necessary instructions included in the strategy, it will most likely become useless. And unfortunately, most of these systems are not quite adjustable and can’t be improved. It’s because they were invented by traders who have spent no more than five years on the market and haven’t learned how to really adapt themselves.
Development of Required Skills
Don’t be upset if at this stage you can’t boast of the ability to adapt. Competitive advantage is a personal quality that you can develop in yourself if you work really hard.
Obviously, you need to start working on this the moment you’ve decided to trade Forex. But even if you overlooked this point and no one told you about the importance of competitive advantage, it's never too late to start. Perhaps this will be your pass to the next stage on your path to becoming a professional.
Equal Opportunities
Have you asked yourself why some traders leave Forex in a year or two while others stay there forever and become masters of their craft? This is because they can all market participants can be divided into 2 groups:
- The first ones understand that they are provided with basic skills that they have to adapt for themselves. They take this knowledge and see how it works for them, how it is applicable in different market conditions. They try to optimize it in order to create their own unique system that will grow and develop along with them. There are a minority of such traders. No more than 15%. It is they who ultimately become professional traders.
- The second group needs to be constantly guided and told what and how they need to do. They take the knowledge they have gained and apply it until it stops working. Unfortunately, such traders don’t have enough perseverance and leave Forex no longer than after a couple of years.
Useful Literature
There is no way I can tell you everything about the ability to correctly adapt to the changing world of trading in one article. I advise you to seek the knowledge of professionals in their field and read a couple of useful books. Among others, I suggest you start with the book by Mark Douglas - “Trading in the Zone”. In the book, you will learn how crucial it is to gain the right trading mindset as it will help you understand what the competitive advantage begins with. The author will help you gain self-confidence and will show how to cope with difficult market situations he personally went through.
How to Gain Competitive Advantage
The whole article says that the path is going to be unique for everyone because we are all different. However, there are a couple of tips to help you get on the right track:
- Work on yourself. Without the right trading mindset and important personal skills, you can’t succeed. Develop self-discipline, patience, and perseverance. These skills are indispensable in trading and will help you in everyday life.
- Get rid of any bias. The market is changeable and so are you. What works now will stop working tomorrow. Today's losses will turn into profits the next day and vice versa. Don’t build expectations. Analyze your every step and get better every day.
- Believe in yourself. If you are going to quit then there is no point in starting. You must believe in yourself and not give up in the face of failure. It is the failure that teaches us the most important lessons and makes us better traders.
I hope it is clear from the article that the competitive advantage is mainly based on the psychological aspect. In order to learn how to improve the technical aspect of your trading system, you need to mentally tune in and be prepared for constant and inevitable changes. Along with your thinking, you’ll be able to adapt your strategy, and therefore gain real competitive advantage.