Forex trading is intense and your emotions can cause more harm than good. Many beginners and experienced Forex traders never learn the basics of money management and emotional control. In fact, over 95% of traders are at a loss in each trade and continue to jump from one decision to another without thinking. You cannot become emotionally attached to your accounts, trades or losses; the potential harm involved with emotional trading can ruin your career. You need to take a step back to see if you’re prepared for the losses and create strategies to overcome them.
Keep your emotions out of the equation.
Forex trading is not the center point in your life. Your income (or additional stream) of income comes from experience, work ethic and objectivity. Objectivity provides a sounding board for logic to guide your decision-making. You save money, time and effort in chasing emotions if you think of trading as an outside event instead of your life’s work. Every trader must realize that trading is only a part of their life, and not obsess over the smallest losses.
Let the markets lead the way.
You cannot control the markets. People may say that the market controlled by the “people”, but it is not true. In general response, you cannot control a trade’s outcome. Pessimistic or optimistic behaviors can hurt the way you view your opportunities. Take a step back to see where you are and if you are aligned with your trading strategy.
Pay attention to your bad habits.
What is your overall strategy? Do you have a maximum loss in mind? Are you prepared for a potential loss anyway? You have to plan for losses in your trading strategies to save time, money and worry. Losing money in the markets is inevitable and building a resilience to those experiences can determine how long your trading account survives. Notice your bad habits, correct them and make another trade with less sensitivity of a potential loss.
Treat each dollar as a step.
Losses prepare Forex traders for future success. It is your responsibility to document each trade’s outcome, your expectations and then the actual results. Monitor the amount of money you invest in each and work on minimizing your trades to maintain a cash reserve. Make each dollar worth it. Know that the successful trades are okay to celebrate in the future, but do not let them interfere with your logic.
Admit Mistakes
Anyone can make the mistake of allowing emotions to control their decisions. Self-discipline, objectivity and resilience chances the way you work, view trades and watch your spending. Without these qualities, your Forex trading career can end in days or even hours under pressure.
The markets are going to move without your input; focus on the trades instead of the potential losses you can have. Use optimism after you finish your day, but check the emotions and ego at the door before you buy. If you find yourself using Forex trading in the wrong capacity, stop trading immediately. Focus on emotional control and gain discipline in identifying emotional buys versus logical buys.
A guest post by Elizabeth Goldman on behalf of Sunbird Forex – home to the MetaTrader forex platform.