Manage your emotions
Manage your emotions while Trading!
Having expertise in market analysis or having extensive knowledge about Forex is not the only factor that determines the success of a Forex trader. You may know thousands of successful strategies and you may be good at using all the indicators out there, but if you don’t learn something that is very important then you will have a hard time making money in Forex. It is often overlooked or completely ignored, but it is something that every Forex trader should become good at. It is the skill of managing your own emotions and is a part of Forex trading psychology.
Victor Sperandeo, a founding partner of EAM Partners, L.P and popularly known as ‘Trader Vic’ says
“The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading.”
There are many people who are extremely intelligent, but still lose in Forex. Because the emotions like greed, fear and an intense euphoria after a profitable trade, cloud their decision-making ability.
When you don’t know how to handle emotions, it can ruin your trading day and it can cause damage to your trading account to the extent of losing a large amount of money or your entire investment. The reason is simple: we take hasty and irrational decisions when we are angry, depressed or greedy.
What to Do About it?
Once we are aware that we may be affected by our own psychology, we realize it may affect our trading on a subconscious level. Awareness is often enough to inspire change, if we do in fact work to improve our trading.
There are several things we can do to overcome our psychological roadblocks, beginning with removing inputs that are obviously biased. Charts don't lie, but our perceptions of them may. We stand the best chance of success if we remain objective and focus on simple strategies that extract profits from price movements. Many great traders avoid the opinions of others, when it comes to the market and realize when an opinion may be affecting their trading.
Knowing how the markets operate and move will help us overcome our fear, or greed, while in trades. When we feel we have entered unknown territory where we don't know the outcome, we make mistakes. However, if we have a firm understanding, at least probabilistically, of how the markets move, we can base our actions on objective decision making.
Finally, we need to lay out what we really want, why we want it and how we are going to get there. Listen in on the thoughts that run through your head right when you make a mistake, and think about the belief behind it – then work to change that belief in your everyday life.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.