Trading is the activity under difficult conditions when the environment is constantly changing and getting more sophisticated. Therefore, successful trading requires skills, knowledge and experience along with many other aspects.
Without any doubt, the emotional aspect is also extremely important when it comes to showing consistent trading results on a regular basis. If you tried trading before, you probably know how it feels when you lose time and time again. It is despair, anger, helplessness and/or fear. On the other hand, it is always nice to turn your trade into a big winner. Still, sometimes, when rookies get lucky a couple of times in a row (which is often the case in the short run), they start being too greedy and risky and eventually lose everything since they lack consistency in many aspects of trading, from risk management to decent analysis.
Indeed, trading is where risk, fear and greed meet inspiration, success and joy. That is why Forex trading attracts more and more gamblers who come to Forex to play hard and get an adrenaline rush rather than winning in the long run and having a decent career in the industry. That is why most market participants eventually lose. They just lack consistency in knowledge, skills, experience and emotions.
Obviously, professional traders know how to prevent their emotions from affecting their trading results. They trained their minds to keep following their trading system despite the short-term results. Indeed, it is always important to focus on long-term results since clumps of unexpected outcomes can and do happen sometimes but in the long run they do not affect the overall performance as soon as the risk management rules are decent.
In this article, the trading experts from Masterforex-V Academy will share with us some of their valuable tips on the emotional aspect of trading.
Masterforex-V Academy on Emotions in Forex Trading
By now, all of us are perfectly aware of the fact that emotions should be avoided as much as possible when trading Forex or any other financial market. Emotions do seriously affect anyone’s trading performance. So, is it really possible to learn to trade without emotions?
When asked this question, the experts answered the following:
Well, trading completely without emotions is next to impossible. At least, it is very difficult. Emotions have always been there. The bigger the trade is the more stressful the process of trading is. Well, it is possible to reduce to the minimum the effect produced by emotions but it is rarely possible to get rid of emotions completely, at least when you trade big and the money you risk is considerable for you and as you trade for a living. One of the best ways to improve your trading performance and to reduce the emotional effect is to teach your brain to focus on long-term results and the very process of trading rather then short-term/current results. Losers will happen. You cannot win forever! Still, you should get satisfaction from the very process of opening, maintaining and closing trades. Decent risk management is another key factor that will allow you to reduce and limit the risks, thereby taking the emotional burden and stress off your shoulders and out of your mind.
It is also very important to learn how to read the emotions generated by market participants that move the market along with other major drivers.
Trading is like driving a car on a highway. If you stay focused, know the rules and can drive the car well, you get many more chances to stay safe and secure than while speeding, breaking the rules or driving a car without a driver license. When you are emotionally stale and calm, you can react much better to everything that is happening around you.
Another thing is to stay neutral towards the market and learn how to see the overall picture rather than trying to label the market as your friend, enemy, ally or anybody else. The market has nothing to do with being affiliated with you so do not overestimate your abilities and opportunities.
Moreover, do not plan your gains. You cannot force the market to give you a certain amount of money within a certain period of time. This is nonsense, especially in today’s highly volatile and less predictable markets amid global economic and financial uncertainty. Just focus on sticking to your plan and trading strategy! The only thing you should keep in mind is the question “How can I get the best from the current market situation?” Being focused on making decent trading decisions is the only option you have to eventually succeed in today’s financial markets as you get a significant competitive edge over the crowd since the crowd is emotional and consists mainly of rookies, amateurs and compulsive gamblers. If you want to be a winning trader, you should do the opposite!
The chart below shows you an example of how greed can affect the results. If you get greedy and abstain from placing a take profit order according to your plan (the upper red line), you may eventually get a loser since your stop loss will be executed (the lower red line).
When a rookie gets such kind of a loser (understanding that he/she could have made some money), it is very difficult to recover emotionally after such a bad luck!
One more valuable tip on becoming less emotional when trading Forex is defining several alternative scenarios and reactions to them. In this case, you won’t see unexpected price moves as often as you usually do. I mean you can develop Plan A, Plan B and even Plans C and D (if necessary).
Do not catch up with the market if you have failed to get in just in time. It is always better to wait for another opportunity rather than entering the market when it is too late and getting a big loser. Discipline is almost everything when it comes to professional trading!
If you combine these factors together and learn some secrets of following the market, your will learn to dominate the market. Understanding your supremacy is the best way to get rid of stresses and negative emotions in trading.
The chart below shows an example of how it is possible to follow the market:
If you want to learn how to trade Forex professionally, please visit the FREE school for beginning traders and investors under Masterforex-V Academy. If you have experience in trading, feel free to join Masterforex-V Academy, Europe’s Best Forex Training Project since 2009. Good luck!
