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Learn Forex but Keep it on the Sunny Side
Written by article default Thursday, 26 November 2009 12:54
You will read everywhere that a positive outlook and a dash of optimism is integral when trading in the foreign exchange market. Learning forex trade is more than just examining charts and diagrams, but rather keeping a stiff upper lip and a bit of self control.
Attitude carries more than the worth of gold when dealing with the pressure and consequence of trading forex. Frustration grows easily when forex traders miss a lucrative opportunity or take a big loss. The temptation to go “all in” can be overpowering and impatience can breed a losing attitude.
Not allowing your emotions determine your next trade is easier said than done. It all comes down to one word – discipline. If you think that after a big loss (or a series of small ones) that you are going to “take vengeance” on the market, you’re about to embark on a disappointing path. Yes, being able to make serious decisions spur of the moment is crucial, but not when they are done in a reckless, emotional way. What differentiates these two behaviors is the thought process leading up to the quick trade.
Throwing off the negative feelings and low worth that accompany a loss is often the driving force that leads to these behaviors. You should never risk more than 2-3% of your capital on any trade, however during these emotional hazes, traders sometimes leverage 5-7% to compensate for the previous losses.
There are a few simple practices that you can implement that can help keep you grounded when trading in such a highly volatile market.
- Have a trading plan. Start your day with a purpose, after reading the reports and signals. This plan needs to have freedom to move according to market fluctuations, but put certain boundaries on your trading behavior.
- Be the adult. When you feel those feelings welling up inside of you that push you to make irrational trading choices, walk away from the trade.
- Keep a “mantra” or “motto” next to your computer. Find something that speaks to you and your goals as a forex trader. Draw on this wisdom instead of trusting your emotions whenever you feel tempted to make forex more of a gamble than an investment option.
- Analyze your losses, don’t just try to erase them. It is irrational to take a loss for 60, 70 or even 100 pips. This is the obvious outcome of a bad trade decision. If this happens it’s time to take a step back and re-evaluate whether you’re trading with your mind or your emotions.
- Put your heads together. Keep in the company of grounded individuals who are also experienced in forex trade. By getting feedback and analyzing together, you will feel less isolated and be held accountable to trade with the right expectations and intentions.