Having the best strategy and being able to analyse the markets will only be able to get you so far in the world of Forex trading.
If you wan to make high returns from Forex you will also need to demonstrate the ability to confront the emotional aspects of investment.
This inevitably means overcome fear when Forex trading and keeping hold of your nerves in what can be volatile and unforgiving markets.
Forex trading is full of actions which elicit an emotional response.
Identifying the best time to enter a position is just one part of the equation. Closing out at an optimum time is perhaps even more important.
These two factors will dictate the level of success that you achieve and will be governed by your ability to trade with a level head and hold your nerve.
The fear which comes from investing your own money is one of the biggest hurdles that all traders must overcome.
The world of Forex is littered with stories of traders investing at the wrong time, or exiting a position just prior to a rally which would have seen them post decent trading results. These are examples of how ‘fear’ can dictate the performance of your trading.
To remove fear from Forex trading you need to not only recognize it, but also ultimately overcome it. Understanding this is the first step that will allow you to address the shortcomings that it creates.
There is a of course a fine line that can be drawn between fear and recklessness. A failure to recognize this, is a common mistake that first time traders make.
Controlling and confronting your fear is not simply a case of jumping back into the market following a loss without the use of proper analysis to back up your convictions.
The foreign exchange market is not a place to make wild wagers with your money. If you seek to address your trading performance in this manner then you are likely to simply compound the losses made on your account.
Instead address your shortcomings by demonstrating an ability to move on. Each opportunity that you take should start from a clean slate. And with a clear head.
For this to happen you must ensure that you don’t carry your emotions and anxieties into subsequent trading sessions.
Often the worry that accompanies a loss is a sign that you are sign that your position sizes are too large. Losing meaningful financial sums is unpleasant and may require a revaluation of your existing money management strategy.
After a losing trade take some time off. Walk away from your screen. Don’t dwell on the perils. There is no way of avoiding the fear when Forex trading, however you can learn to deal with it.
You may want to re-eavalute your strategy. However only do this when your mind is in neutral. You might otherwise risk deviating too far from your plan for the wrong reasons.
The automated or mechanical approaches of many trading strategies are designed to help remove many of the emotional aspects of trading. By following set rules, position sizes and stop loss levels the process of trading is not only simplified it also seeks to remove the weak link from the trading process; the unruly emotions of the trader himself.
The caveat here is of course that the trader must follow the rules of the system without interference if the system is to deliver the anticipated results.
Systems like the london breakout strategy for Forex are designed to help carry you through the rough times and allow you to profit when times are good. For this reason once your strategy is in place and validated, sticking to the rules provided is the best way in which you can get yourself back on track following a period of poor performance.