How To Control Your Emotion In Forex Trading
In today faq, we have an important question from one of our fellow trader here. Personally I feel that this is one of the factors that can determine the success or failure of a trader besides having a reliable strategy.
Below is the question
How do you control your emotions since you have been trading for a long time?
Because I believe that once I know how to do that will be able to make the right decision.
Before I talk about how I control my emotion in trading, let me state out a few of the common emotional problems faced by traders as I am once a new trader like all of you guys here.
1) Eager to get into Action Syndrome
I bet most of you guys here are always eager to get into a trade as most of you think that the more trade you make, the more profit you will get.
One thing you guys did not take into consideration is the more profit will only come when you have a reliable strategy that works.
If not, the more trade you make, the more losses you will get in the end.
Even for some of you who already have a strategy on hand, you tend to enter trade even when it is not 100% according to your strategy as you are always eager to get into a trade.
2) Revenge Trading Syndrome
This is another very common syndrome among traders as this is what I do in the past when I am new to trading.
Whenever I get into a losing trade, I will want to immediately enter another trade to make the money back and these are what I call “Revenge Trade”.
90% of these “Revenge Trade” ended up as losing trade in the end as those trades are triggered purely based on emotion and not by your trading plan.
Therefore it is very important for you to cool down and walk away from your computer once you get a losing trade. This will prevent you from entering a trade based on your revenge emotion.
3) Assumption Syndrome
I bet you will have at least one of the above syndrome in trading as these are common emotional problems that new traders tend to have.
In fact, these are common problem that traders who have been trading for years are having and that is why they are still not making consistent profits in trading after years of trading.
This assumption syndrome is only applicable to those who already have a reliable strategy on hand.
What they do is they tend to assume that the setup is going to trigger their entry plan. For example, their trading plan states that they will make an entry when the price hit the upper band of the Bollinger band and start to repel downward to break the support trend line.
What these traders do is they will make an entry once the price hits the upper band of the Bollinger band as they assume that the price will definitely break through the support trend line.
What happen was that the price was held by the support trend line and it started to move up and hit their stop loss.
In fact, the assumption syndrome is somehow connected to the Eager to get into Action Syndrome.
Traders start to assume something because they wanted to get into a trade faster and this is usually what prevent them from being profitable every month.
The solution to the above problem are as below
– Understand that trading is not a get rich quick scheme
Most traders get into forex trading thinking that they will be able to make money after one week of learning. That is why they are eager to get into a trade as they want to start to make money fast.
Trust me, I have been trading forex since 2009 and I can tell you that forex is not a get rich quick scheme. It is a real way of making money like any business you get into.
You must have the patience to work on the business by learning a proper strategy as this is the only way you can be profitable in trading.
Without a reliable strategy on hand, you will never be able to make consistent income from trading.
Once you realize that forex is not a get rich quick scheme, you will have the ability to control your emotion.
– Trade on a demo to train your discipline and patience
To be able to better control your emotion in trading, demo trading is the best way to do it.
That is why I always suggest my students to start with a demo account first and they will only move to live trading after they managed to get 2 consecutive months of profit with my strategies on a demo.
The only way you can be profitable in trading is when you have a reliable strategy plus you have the discipline to stick to it like a super glue.
Therefore if you are able to produce 2 consecutive months of profit in your demo, it means that you already have a reliable strategy on hand plus you are trading according it.
As long as you do not adhere to your strategy, you will find that you are unable to generate consistent profits from trading.
I hope that I have answered your question and do feel free to email me whenever you have any question.