Trading can be tough businesses to be in if you are an emotional person. When you are handling finances, you must be as rational and practical as possible, or else you will end up suffering unexpected losses.
Forex trading is not an exception. The ups and downs in the market will most likely affect you mentally. You will feel a number of emotions like fear, hope and greed as you conduct trades. If you are a beginner, your confidence will also rise and dip at the slightest occurrence.
The Top 5 Tips to Keep Your Emotions in Check While Trading in Forex
To become an expert trader, you must overcome your emotions and take sensible decisions.
Battle your fear:
If you are just starting out, then you must feel a stab of fear every time you think of entering a trade because of limited resources. Fear is a trading demon that can ruin your trading career because you will never be able to take risks. The thought of suffering a loss prevents you from taking any risks.
To overcome this irrational fear, you must understand that no trader is spared from the random distribution of victories and losses in trade. If you are in complete control of the risks you are taking per trade, then you should not be scared. Also, make sure that you do not go overboard with your expectations or you will be controlled by the fear of not being able to meet them.
There is one easy way you can reduce your fear. You can lower the amount of money that you put up at risk per trade so that any loss you may suffer is not disastrous. You can continue this until you feel less afraid. This is especially helpful if your fear was triggered by a big loss in the first place. It is not easy to lose your hard-earned money in trade, but you will not be successful if you do not learn to take calculated risks.
The lesser you put at stake, the lesser the damage will be if the trade goes south. You will sleep peacefully at night knowing that you cannot get ruined because of one failed trade. The key is to lower your trades as much as possible and then start building on it.
Do not give in to regret:
There is no certainty in trade, which leaves a lot of space for lingering regret. However, that can affect your trades negatively and lead you to make more mistakes. Maybe you did not enter a trade even though you wanted to, and it turned out to be profitable. On the other hand, you may have exited a trade with a lesser profit than you could have gathered had you stayed a little longer. Together, these events can add up to a lot of regrets and hurt which can destroy your account if you let them.
If you do not want to be consumed by regret later on, then do not fear to go into good trades that meet all your needs. Having an efficient trading plan will ensure that you do not make bad choices. The moment you deviate, you can check yourself. However, do not pass on trades that fit into your plan and have good prospects because you were scared.
As a good trader, you should be able to move on from your last trade and capitalise on the present one or else, you will become an emotional mess. The market will not wait for you. Use every loss as an opportunity to grow.
Over-confidence is not your best friend:
Just like fear is a demon you need to kill, arrogance is also equally dangerous when you are in the Forex trading market. Being too confident about your abilities can backfire very fast. When traders begin to have a good winning streak, they feel like they can never be wrong. Over-estimating your luck can deprive you of good trading opportunities and profits.
If you are arrogant, you refuse to learn and grow. That is how you end up falling behind in the race. Being intelligent and well-versed in risk management is much more important than having blind faith in your luck. Arrogance can lead to trading account blow-outs. Instead, accept that you do not know everything and devote yourself to learning more about the trade. Do not wait for a big loss to open your eyes to the reality of the situation finally. Remind yourself of the losses that you suffered in the past and you will surely want to improve.
Make a Trading Plan
Just because arrogance is a big no-no, it does not mean that confidence is bad. If you are someone who doubts himself or herself constantly, then Forex can blow up in your face. Second-guessing yourself is an indication that you do not believe your own abilities. When you see the perfect trade and end up walking away from it, you will regret the missed opportunity in the future. If you are constantly telling yourself that you are not a good trader, you are wallowing in your own under-confidence.
If you ever feel doubtful about something when analysing a trade, look it up on the Internet. You will always find relevant information. One way to increase your confidence is to identify a trading edge that will help you decide which trade to go for. Not being in control of the market does not make you a bad trader.
Follow Experienced Traders
Know the traders who are making their mark. Follow their strategies and know their practices that are making them successful. Successful traders don’t just display dedication, they know the market in and out and use the right tools. Knowing how they do things can help you better your strategy, and lead to better rewarding investments.
A Word of Caution – Do not raise your hopes unnecessarily:
Hope can be dangerous if you rely on it to take your trading decisions. Being hopeful about how far you can take a trade and ignoring any signs to the contrary will increase the chance of your loss. You will feel emotionally down if you hope comes crashing down. Moreover, hope can also breed greed because you constantly look for more money. When you feel like you are basing a decision on false hope, immediately curb it and look through your trading plan.
In trading, emotions often act as your enemies. Beware.