By Chris Donnell
Much has been said about attitude, positivity and optimism in Forex trading. It is true that one’s disposition while trading is very important indeed. Attitude and view point are so critical that they can dramatically impact a traders performance. Emotion and psychology can change on a dime and significantly affect what one sees and does. A trader that misses a trade or two one minute can easily be suddenly grow frustrated and be compelled to go “all in” on the next trade risking everything. Similarly, a trader who grows overly impatient with the apparent lack of trades in the Forex market might say “what the heck” and trade just for fun. Develop the skill to properly control and utilize your attitude while trading is paramount and should not be under-estimated.
When trading Forex you must NOT let your feelings affect your decision to trade. It is legendary for new traders who are undisciplined and uninformed to get mad and “take revenge” on the market after a string of unnerving losses. The impulse to “get your money back” after losing a few trades is so great it should be consciously avoided. It sounds cliché to take a break from trading after you hit a certain predetermined level of loss. But fact remains, one of the quickest ways to lose your capital is to take trades that are not well thought out or otherwise executed on the ‘spur of the moment’. This is not to be confused with the quick decision making required for scalping in the Forex market. The critical difference lies in both the methods taken and the step leading up to taking the trade.
In the past, I have been trading and after losing four or five trades I can begin to feel a subconscious ‘shame’ welling up inside of me. The urge to obliterate that feeling is so strong inside of me that I will do almost anything to eliminate it. Traders who otherwise normally use very good money management while trading, never risking more than 2% of their capital on any one trade, might up the leverage to 5 or 6% suddenly to compensate on the next trade for the losses of the previous few trades. This is a sure fire way to devastate your account. We cannot deny that even for modest people the desire to make money (read ‘be right’) is so strong that it can skew ones behavior in serious ways. The way to avoid this is by choosing trades wisely and doing so with adequate reasoning, appropriate principals and the right rules.
A trade must be well thought out to be valid. It should not be just ‘a stab’. It should take advantage of the natural formations that the market gives us. Let the market tell you where it is ‘most likely’ to go next through its own activity. We are merely attempting to find the ‘highest probability’ trades and letting the winners go as far as they can before taking profit and cutting the losers off at a predetermined level (usually 10, 20 or 30 pips maximum). It is inconceivable that a trader would let a loser go for 60, 70 or even 100 pips. If you do this, then you are making a bad mistake. If you do this, it means the decisions leading up the trade were wrong. It is incumbent on responsible traders to not just move onto the next trade, but instead analyze and try to find out the reasons for the error.
In conclusion, the Forex market is open 24 hours a day and there are a couple dozen viable currency pairs to trade. If you miss a trade today you can bet your bottom dollar there will likely be another solid trade coming along in a very short while. Don’t let anything govern you trading except your well thought out strategy. Your mind should be clear, positive and free. If you have anything nagging or negative factoring in on your decisions, however innocuous, you should immediately check yourself. This is also why it is important not to isolate yourself but to surround yourself with like-minded individuals who can also help evaluate your trades and their viability. Avoiding a mental trading rut and only trading when conditions are optimum is vital.
About the Author
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