In Forex trading, perhaps the most important component to succeeding long-term is learning to effectively control your emotions as you trade. Many traders unknowingly trade in an emotional manner that systematically destroys their trading accounts. If you are unsure whether or not you are trading emotionally, look at this list of emotional trading traits to help you decide, then read on to figure out how to fix your emotional trading problems.
Traits of emotional Forex traders:
• Risking more money than you are comfortable with losing per trade
• Jumping in and out of the market with high frequency
• Not having a trading plan to preempt your trading activities
• Not having a trading journal to track your trading performance
• Feeling an overwhelming sense of urgency to jump back into the market after a losing trade
• Feeling an overwhelming sense of urgency to jump back into the market after a winning trade
• Sitting in front of your computer for hours staring at your charts in near-panic mode
• Having a general feeling of “loss of control” over your trading
If you think that you exhibit one or more of the above traits on a regular basis, you are probably trading from an emotional mindset and need to fix this problem as soon as possible. The longer you go on trading emotionally, the longer you will lose money in the markets. No matter what trading strategy you are using, you must manage your emotions correctly as you learn to trade forex.
Tips to help you control your emotions in Forex trading:
Here are some tips to help you manage your emotions and get off the track of haphazard, out-of-control trading, and on the track to controlled, disciplined trading:
• First, you need to master an effective trading strategy so that you know exactly what you are looking for every time you enter the market; if your setup is not there, you don’t trade, it’s that simple. One effective and simple trading strategy is price action, learn to trade forex price action.
• Next, you need to take the trading strategies you have mastered and create a comprehensive yet concise Forex trading plan around them. This trading plan will specify the setups you will trade, how and when you will trade them, your money management plan, and anything else you can think of. The point is to know what you will do BEFORE you do it, this way you will preemptively eliminate the potential to become emotional as you trade.
• Next, in order to maintain discipline and control over your emotions, you should create a trading journal so that you can track your trading progress over time. This journal will allow you to see how you are doing in terms of profit / loss, winners / losers, but also in terms of discipline. If you are trading in a disciplined and controlled manner, your Forex trading journal will reflect this and you will thus create a track record of disciplined Forex trading, this is a very valuable thing to possess because it proves to yourself and to the world that you can trade disciplined. If you can create such a track record you can then find people to fund you in order to trade large amounts of money.
Hopefully, from reading this brief article on Forex trading psychology, you will have a decent grasp on why controlling your emotions is so important when you trade and how you can go about controlling them. You should do everything within your power to put the odds in your favor as you learn to trade and learning to control your emotions is necessary to increasing your odds of Forex trading success.