How to Control Harmful Emotions While Forex Trading
Happy New Year! 🙂
It is the first day of 2015 and it is not a good idea to talk technical. Instead, I am going to get emotional and talk about controlling of the emotions while trading forex, because it is the most important thing for traders.
If you want to trade proficiently, you must control your emotions. As you read this article, most likely, you’re in a calm state and can agree with everything stated here. But once you’re trading, you may momentarily forget what you’ve read. Remember:
(E)Motion = Energy + Motion
Think of emotions like water. Water will usually find an outlet, but if it doesn’t, it will make one. Like water, emotions find outlets of their own, as in the form of behavior. Quite often emotions work their way into other parts of the body as causing gastrointestinal upsets, muscle tension, headaches, or even some form of disease.
There are two types of emotion: present (what you’re feeling right now) and anticipatory emotion (what you expect to feel later on). While the first needs to be addressed, the latter type is as powerful or can be even more so than the first. An anticipatory emotion (or possible future regret) is for instance, “if I exit the trade too late and lose a lot of money, I’ll feel horrible.” Another good example is if you’re in a winning trade and it isn’t yet at its target and meanwhile, you’re nervous as you see your gains slowly diminish, you’ll regret not exiting the trade sooner. As a result, you pull out, having made only a small profit, but knowing that you have brings a small sign of temporary relief. Hence, the early exit prevents the feeling of future regret.
So here is what you ought to do. Always take three days before engaging in action. The first day will be to anticipate emotion. We all have different future emotions, so you must predict what your feelings will be before entering a trade. Next, you need to acknowledge an emotion by describing it in words (write it down) being as graphic, vivid, and descriptive as possible. Finally, you’ll want to analyze this emotion. When have you felt this way before? How has it made you behave? What might it be connected to? Why are you feeling this way?
Anticipating an emotion is not always so easy. It takes practice and a lot of people have trouble doing that. How do you manage anticipatory emotion? Imagine you’re watching the market and want to jump in, yet, you have issues with impulse trades. You need to project yourself into the future emotional state by asking yourself, “how would I feel if I were to enter right now?” “How would it affect me in the future?” This is a technique professional traders use.
As we observe the Forex market, each raise in pips brings us a sense of hope and relief while each drops in pips brings a feeling of fear or personal attack. One way of dealing with these emotions is by analyzing process goals and outcome goals. Process goals are things you can control, but require practice. On the other hand, outcome goals are circumstances you have no control over such as profit and loss and the movement of the market. However, outcome goals can become a result of process goals. The best process goal you can practice is controlling your actions despite pain or discomfort.
One instance of a process goal is to create a pre-market routine to use right before you begin trading. This can be meditation, exercise, or any activity that enables you to focus on the market. Likewise, you can create a written journal of your emotions as you trade and then review it before trading the next day.
Controlling your emotions and setting goals are extremely important in Forex trading. They provide direction and discipline, which in turn leads to success. Without them, you will have no goals and your trading techniques are not too likely to improve.
I am sure 2015 is the first year of being a “consistently profitable” trader for many of you. No matter how long you have been learning and practising, 2015 can be a different year for you. It is all based on yourself. You are the one who can change everything overnight. Believe me that it is not too hard to become a “consistently profitable” trader. Here is what you have to do briefly:
- Learn the basics.
- Learn a trading system.
- Demo trade at least for 6 months to master your trading system.
- If you could make profit for 6 consecutive months with your demo account, then open a too small live account and repeat what you did with your demo account.
- Keep on trading and growing your live account.
Forget about looking for more profitable trading systems. If you can consistently make profit with a trading system, it is the best trading system for you, and there is no better trading system.
Just follow the above stages, and don’t worry about any other things. Emotions will have no room to interfere if you follow the right track and think about taking the strong setups only.