There is one golden rule in Forex Trading – If you want to be victorious in your trading, you must first learn how to stay objective and emotionally detached. Most novice traders do the opposite and go through an emotional rollercoaster, sometimes feelingon top of the moon when they win but become utterly depressed when they lose.
There is always a very high degree of risk involved in trading. Regardless of what you trade, remember past results are not indicative of any future returns. Your trading is entirely at your own risk. It is your sole responsibility to properly evaluate the accuracy, completeness, and usefulness of charts whenever possible to get a feel for any key levels and directional outlook.
Examining the charts will assist in determining how aggressive we want to be in terms of position size and options strategy. Meanwhile, even after a string of defeats, professional traders still maintain a calm nature and relaxed attitude. They have the mental toughness, to not be emotionally affected by the market’s inevitable ups and downs.
If you want to be a consistently profitable investor, you need to remain as relaxed as possible and prepared for the uncertainties.
Being emotionally detached is impossible for some, but how you actually respond to the happenings is what matters the most.
Keep in mind, sometimes the most experienced traders lose their calm and allow their perplexed emotions to take over. That is inevitable for any human being, and when things go wrong and turn against their favour, many traders will begin to question their methods and strategies.
When things seem to be going well, it’s natural to get excited but this is where traders start to get complacent. Overconfidence sets in, and traders continue to take more trades, which leads to more difficulties than good due to overtrading.
When things are moving in your favour, you begin to feel good, which will eventually cloud your judgement for a while. You believe the market will continue to remain in that state for a certain amount of time and you want to keep profiting from it until the condition changes.
However, keep in mind that the forex market goes through stages, the trend may have already changed and now the market may be going in the other direction.
Many inexperienced traders typically have emotional feelings and usually place too much on a single trade forgetting about risk management. This takes place after emotional euphoria is over. By that time, the harm has already been done and it would be difficult to make up for the deficit.
In order to minimize risk, proper risk control is essential. Small defeats can be quickly absorbed and made back.
As stated previously, you should always treat trading as a business rather than playing like in a casino. It should always be driven by good planning, not on pure emotions, just like any other respectable business. The aim is to make fair trade decisions in this regard.
Controlling emotions and maintaining the proper mindset is essential for making sound decisions under market pressure and ultimately for trading success. It all boils down to self-control.
You Can’t Have It All
Always bear in mind that losing is a part of the game when it comes to forex trading and if the losses cause you sleepless nights, Forex trading is not for you even if you believe you can get rich. The critical thing to realize is that it is much easier to make money if you are “in tune” with your strategies, whatever they may be.
Every trader acknowledges that they might win or lose at some point and you won’t always be profitable. That is why, in order to avoid overtrading, it is critical to have a specific set of goals in mind for how much you want to earn on a weekly/monthly basis based on your current trading performance; otherwise, it could drive you crazy.
Lose Money That You Can Afford
Everytime you trade, keep in mind that you should only risk money, which you don’t need. You should set aside a portion of your funds for regular outgoings such as, billsand other obligations.
Don’t put money at risk that you’ll regret later. Be prepared to deal with losses because they will come. That’s how the economy operates worldwide. We definitely won’t do great on every trade, even if we call ourselves a pro trader, but by sticking to a strategy, we’ll be able to place trades that leave us with a level of uncertainty we’re comfortable with.
Don’t Go Overboard With Your Trading
If you’re confident in your trading and on a winning streak, know when to walk away. If you’re on anwinning streak, it’s natural to want to continue going however keep in mind that the market can reverse and you could end up giving all your wins back to the market.
Finally, discipline trading is all about your strategy and it is the cornerstone of making money in the markets. You’ll be well on your way to success if you can become a disciplined trader with a robust framework in place.