Forex Trading – Mind game
Your understanding of Forex trading stems from your initial introduction to the markets – either quick money or a scam? Trading success is not solely based on the tools at your disposal. Fear and greed have the biggest emotional impact on the success of a trade.
As a trader, you need to be self-aware to make it easier to keep your emotions in check and stay logical.
I will list a few scenarios that I have found myself in and tips to help you navigate the emotions:
1.Question of faith
Lack of confidence or the opposing – overconfidence, is common in all traders.
- Exiting the market when trades appear to head in the opposite direction because you are not confident in your set-up and strategy. When you notice that the market is retracing and feel the need to exit before any significant loss. Pity sets in when you see the market resume the trend and continue in the direction predicted.
- It is important to watch your trades and exit when you see that something is going against you and limit your loss. This decision is calculated and not an emotional response.
- The same can be said when you are afraid that you will miss the move and over-leverage your account to gain as much as you can from the markets. You risk more than your account can handle all in the hopes to catch the move.
- Adding to your position is a common and lucrative tool in trading. DO NOT use it to milk a missed opportunity to pocket as much as you can. Remember that the market moves in waves and missing one wave does not disqualify you for the next. Use the opportunity to study the movement and take advantage in future.
2. Fools Rush in
If you follow our channel or read any of our blogs you would know that demo trading is something that I hammer on continuously. It builds confidence and experience.
- Whether you invest in a community that teaches you their strategy or take the time to put one together, you need to practice. In the safe confines of your demo account, you can manage your funds and active trades without the loss of real money.
- Traders enter the market based on something that they have seen or heard. They know the set-up, but they are not knowledgeable on market influences and end up guessing. Do not rush into trading before you are confident and comfortable with the rules of your strategy
3. Changing things up
If you do not have faith in yourself, you need to stay out of the markets. The voices of others can ring loud in your ears and cause uncertainty. Remember that there is no holy grail strategy. ALL TRADERS have losses if you meet someone that says different- RUN!
- All strategies have the potential of profitability, but they are not a one size fit all. You may find a strategy that works for others, but somehow you cannot get it together. Do not feel discouraged when you have losses, but use that as an opportunity to learn and grow.
- DO NOT amend your strategy based on the moves or wins of other traders. If find others doing better than you in the market, and amend your strategy to achieve bigger wins, you stand to loose even greater. Remember that each person’s talent and skill set will influence their trading style. Once you have found something that works; trust yourself.
Lessons that I have learnt:
There is no real way to get your mind right. I am sure that the most experienced traders will tell you – it is a matter of practice, patience and acceptance that helps them sleep at night.
- Practice and research your strategy to ensure that you have the best tools at your disposal
- Be patient and ensure that you enter your trades at the perfect time. Quality is better than quantity in this regard.
- Losing is part of the game, but ensure that you manage your risk to avoid losing your entire account balance on one trade. Trading high risk and low reward has a place in the market, but is not a sustainable model for those looking to trade full time.
The markets can take you on a full range of emotions in a small space of time. Take it as it comes you will find your head and heart at peace.