Professional Forex traders can all attest to periods of time when fear becomes successful in invading their mind and setting the tone for their trading. The average trader can be faced with a lot of fears when trading in the Foreign Exchange Market. The fear of losing money, being wrong, missing out on a business opportunity, looking foolish or not being good enough at trading are always faced by traders. A certain level of fear is acceptable as it makes traders more vigilant, especially when trading online, but too much fear keeps them from taking real risks and trading opportunities that could be beneficial to them.
How Can The Average Forex Trader Avoid Fear When Trading?
Having an ever-present concern during trading is responsible for a host of problems that plague traders. This fear might keep a dealer from making sound decisions, setting stops/ exits, choosing good entries, pulling the trigger or deciding when to leave a trade. These kinds of fear might cause a trader to ignore their trading rules, leading them to trade away from their original strategy. Fear has also been responsible for dealers making repeated losses which may take a toll on their health, often from anxiety and lack of sleep. In the worst case scenario, this fear can make a trade blow out their account or stop Forex trading activities altogether.
Previous negative experiences in the Foreign Exchange Market often fuels traders fear. A “frame of reference” ends up creating a breed of marketers who learn to depend on these bad experiences before evaluating or responding to current events. Rather than monitoring each and every trade for the unique event it is, a fear based trader reacts by falling back to the negative experiences they previously had. The biggest problem comes when we get stuck in certain adverse situations and find it hard to figure out how to move forward to continue learning and developing. If this is the problem that has been afflicting you and affecting your trades, how does one deal with fear when trading? Below are strategies on how to overcome the fear obstacle:
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- Learning to accept risks; Traders should always be aware that Forex trading inherently carries risks. To become a successful trader, one must have the ability to agree the fact that trading, in its very nature, carries some risks. Making gains while trading in this volatile market needs traders to be ready to take chances when opportunities present themselves as this is the only guarantee for profitable trades.
- Clearly defining your trading approach; to combat fear, one needs to have a clear strategy that they have full confidence. Traders should be confident enough to follow their plan because of the previous experiences they have had following the said projects. If an operator lacks a transparent trading approach, they run the risk of lacking confidence which ultimately leads to more fear
- Managing your risk; make an effort at always managing the part of trading that you exercise control over. You need to risk only a small percentage of your trading on any one trade. Actions such as increasing leverage to improve a trader’s position the market have been now to increase the risk of making huge losses. Many things are out of a dealer’s control, so ensure that you always manage those things you can control.
- Getting comfortable with losing money; Losing in the Foreign Exchange Market is like breathing, every trader needs just to get used to it. Traders need to accept this universally accepted notion to cope well with situations in which they lose funds. Fear causes panicking and panicking can cause an otherwise disciplined trader to abandon their trading strategy and make poor decisions. Individuals must thus learn to accept and get comfortable with the fact that losing money is a realistic outcome during trading.