Trading Emotions is something everybody has, or will come across at some point during their journey to becoming a successful trader. This is the harsh reality everybody needs to accept, but most importantly learn to deal with. Every trader is different; different mindset, different trading style and a different tolerance before allowing their emotions to get the best of them! The Forex market can sometimes be a dark place. This comes to no surprise considering the best and brightest financial minds compete for their share of the ‘money-pie’. Where money is present, emotions run wild. At the end of the day it comes down to the ‘Survival of the Fittest’!
In this article I’ll discuss how our emotions can sometimes get the best of us while trading. We will also look at a way to get past it using a positive mindset, letting the past be the past while focusing on the future. Without further delay, let us jump into: Trading Emotions – Best Friend Or Worst Enemy?
UNDERSTANDING HUMAN EMOTION
Before we can learn to deal with our emotions we need to have a basic understanding of what it is, and what can trigger it for the good or bad.
In psychology and philosophy, emotion is a subjective, conscious experience characterized primarily by psycho-physiological expressions, biological reactions, and mental states. Emotion is often associated and considered reciprocally influential with mood, temperament, personality, disposition, and motivation, as well as influenced by hormones and neurotransmitters such as dopamine, noradrenaline, serotonin, oxytocin, cortisol and GABA. Emotion is often the driving force behind motivation, positive or negative. An alternative definition of emotion is a “positive or negative experience that is associated with a particular pattern of physiological activity.”
99% of that sounds complicated and boring to say the least. All we are interested in is the “positive or negative experience that is associated with a particular pattern of physiological activity.” This ties in well with an article Sterling wrote a while ago: Forex Psychology 101.
WHAT CAUSES EMOTIONS WHILE TRADING FOREX
Like I mentioned in my introduction, when YOUR money is on the line you tend to be emotional. This is understandable right? We are only human, but here is a few things that can help keep them at bay:
- Never risk money you can’t afford to lose!
- Do not try and make up for your previous loss by revenge trading!
- Accept the fact that you will have losses!
- Confirm your trade before executing it!
I am 100% sure we all are guilty of not following some or all of the above mentioned at times. Risking money you cant afford to lose is arguably the biggest culprit of them all! Failing to follow that golden rule will trigger a cycle of negative emotions viz. Fear & Greed.
Risking money you can’t afford to lose
As soon as you made that deposit into your Forex account you already made 10 steps in the wrong direction! There is absolutely no way you can make smart calculated trading decisions knowing that you just can’t do without that money in the first place. I am sure you have seen the YouTube video: ‘Day Trading Ruined My Life’. That is where you are heading to sooner than later. There is no ‘nice’ way to say it. Every negative thing will follow. You will Revenge Trade, allow Losses to get you down & make Execution Mistakes. 90% of you reading this can confirm the trend of happenings…
My Advice: Start putting money aside for your trading account. Continue to demo trade and educate yourself. Even if it takes a year, the markets are not going anywhere!If you can accept the fact that the money you are depositing is already lost, you are ready to trade with it.
POSITIVE EMOTIONS WHILE TRADING FOREX
Positivity is a type of mindset you as a trader need to put yourself in. Although it might not always be an easy task, it comes with practice. You might be surprised what type of impact it will have on your overall trading. How you can stay positive while trading:
- Set realistic goals to achieve
- Learn from your past mistakes
- Stay in contact with other positive traders
- Follow your trading plan at all times
Setting realistic goals is the first step in the right direction. This will prevent you from falling into a ‘negative state’ when trying to achieve the impossible. As soon as you realize everything takes time you can focus on the short term goals, staying motivated as you reach every small benchmark.
Set realistic goals to achieve
The whole reason you started trading is to reach an ultimate goal, whether it’s to generate a sideline income or to become a full time trader. You need to believe in yourself from the very start or you have already failed! Don’t expect to double your account in the first month. Gaining 2% on your investment is something to be happy and positive about. Be realistic to avoid feeling disappointed. Doing so will allow you to learn from past mistakes, meet other traders with Similar Goals & to Stick to your Plan!Just as a negative cycle can start, so can a positive.
My Advice: Write or type your short and long term goals. Place it somewhere close by, allowing you to look at it at the start of every trading day. After you achieve a goal tick it off the list. Seeing your ultimate goal moving closer will help you stay positive and motivated!
THE FINAL WORD
As humans we hate to fail whether it’s at a sport, work or at trading. We all know the feeling. That feeling should keep you from doing so again. Stay positive and never give up on your dreams! You can also be up there with the top Forex traders, just-give-it-time. Allow your positive emotions to be your best friend!
“Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.”
-Thomas A. Edison