Overcoming Fear in Forex Trading
Fear is not actually our friend. While successful forex traders are in control of their fear, novice traders can become controlled by it and ultimately become nervous, fearful and unable to take good decisions. The ‘entering’ and ‘exiting’ of a trade turns out to be a terrifying
To become a victorious trader, it is necessary to make fear our friend, to control it and flow with it so as to gain the benefits such an endurance mechanism has to offer. Traders need to realize how the different aspects of fear can manipulate trading performance in a negative or positive manner. Fear is obvious and is processed fairly on a subconscious level, but when fully realized, it can help you advance your trading performance.
Thus, fear can be broken down into three categories:
- Fear of Loss
- Fear of missing good trades
- Fear of being wrong
Fear of Loss
Trading is similar to any other business because losses are a part of the game. However, losing repeatedly can lead to psychological scarring that can paralyze and make the trader with frightened when sitting on the trading table.
The focal point should be on avoiding big losses not on small ones. If you cannot manage emotion for a small loss, you will miss an opportunity on potential large moves because every trade you place has the risk of turning against you. It is very important to know how much you are ready to lose in any trade.
To conquer the fear of losing, demo trading and trading with small amounts enables you to focus on execution of your trading method rather than profit and loss.
Fear of missing Good Trades
Fear of missing ‘good’ trades can be risky because it will often influence the trader to join the market at any price. Excitement and thrilling refuse the trading plan with little thought to possible downside risk. This fear of missing out on trading opportunities is something you will have to get rid of if you want to become a Successful trader, for the reason that if you don’t, it will cause you to over-trade.
The major problem that I see novice and struggling traders making is that they basically trade WAY too much. Keep in mind that, the market is not going anywhere so there will always be another day to trade so don’t be anxious about missing out on a good trade setup or two. It is better to be careful and miss out on a trade than be crazily trying to force trades when there really is not anything worth trading.
Fear of being Wrong
Focusing on being ‘Right’ rather than making money comes from the traders’ ego. It is the ego that relatives the trader’s net worth with his/self-confidence which leads to profits being taken too early or to exit at break-even.
As a trader you must move from a frightened, fearful mindset to one of confidence, one which facilitates you to learn from your mistakes. In order to become successful, you have to believe in your aptitude to gain more profits than your losses. That makes it simpler to continue to execute trades after a cord of losing positions.