One of the worst enemies of a forex trader is emotions. Emotions in trading can ruin you in about 5 minutes, because the market is emotionless. It doesn’t care how you feel. It only does what it does independent of anyone’s thoughts, wishes, or feelings. It is objective. And that’s what you need to be. Here’s how to remain cool when things heat up.
Fear Nothing
The only thing you have to fear is fear itself, right? Well, sort of. Lots of traders get whipped up into a frenzy when they lose money. It’s natural. But, letting that fear control you is a huge mistake. Nobody trading in the market likes losing money, and yet it has to happen. On one side of the transaction, someone gains, and on another, someone loses.
Many forex brokers will give lip service to the idea that you shouldn’t let fear control your trading, but even they aren’t immune to getting spooked. When you trade on margin, pay attention to when the broker makes a margin call. They too get scared.
The important thing is to set intelligent stop losses, and walk away the second you hit them. Give your fear another outlet – something other than the market.
Don’t Get Greedy
When you’re winning, it’s easy to want to double down on your position. Usually, this is a mistake, even when the trend is with you. A strong tailwind can mask the top, and it can lull you into a false sense of security. All it takes is one good whipsaw and you’re dusted. Stick to your entry and exit plans, and do not alter them even when you feel the urge to increase your profits. There will always be another trade.
Don’t Lose Hope, But Don’t Put Faith In It Either
When you enter a trade, and it immediately goes against you, don’t lose hope. Remember, the market has a tendency to go back and forth a lot. If you made a mistake about an entry point, give it time. It may correct itself. Stick to your stop loss. At the same time, don’t hold on to hope that isn’t there. Don’t start adjusting your stops in an attempt to recoup your losses. That’s never a long-term winning strategy.
Don’t Get So Excited
Making money is the most thrilling thing in the world when you’re sitting in front of your computer staring at blips on a screen. And, while it’s tempting to get excited about all of this money, don’t overdo it. Excitement is fine, but it’s also dangerous. It can cause you to start changing your rules mid-stream. Stay the course.
Don’t Get Depressed
When you lose money, getting depressed is a common consequence. However, you must keep things in perspective. Most traders lose money in the markets at one point or another. If they don’t lose money, it’s because they haven’t been trading long enough or they quit trading before they see their first loss. It happens. Embrace it and get ready for your next trade.
Don’t Seek Revenge
Getting mad at the forex market is surprisingly easy. When you’ve been trading all day, and you lose your entire day’s gains, it’s enough to make your blood boil. But, while it’s OK to feel upset, you shouldn’t feel angry at the market. There’s no injustice being done here, and there’s nothing you can really do about it.
Joel Marsden is a self-admitted Forex trading enthusiast who is always looking for better ways to trade. When he finds them, he enjoys writing about it on various financial and investment websites.
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