How to Overcome Emotion during Forex Trading

How to Overcome Emotion during Forex Trading

Forex trading is a popular currency exchange business where people buy and sell currency pairs after holding them for a certain period. Many people are earning money from this platform, though the industry is a risky one for beginners. New traders enter this market with a lot of expectations in them, but the situation becomes worse when they place the orders randomly without even realizing the market condition.

Emotion is regarded as the greatest barrier in this trading industry, and many beginners fail to make money by being too emotional. In this article, we will highlight the types of emotions and the ways to overcome them.

Common types of emotion

Three major types of emotion can develop psychological stresses among the traders, and they are –

Greed

Greed arises when the investors want to make too much money within a single trade. As a result, these guys start taking greater risks without adopting any risk management techniques. Therefore, during a market crash, they can’t do anything to minimize their losses. In addition to this, in the hope of earning too much money, some of them start overtrading.

Fear

Fear arises when a newbie loses a few trades in a row. When these guys become too scared, they don’t want to enter the market, and thus, they lose a lot of potential opportunities to win a deal. Besides, these people lose their confidence level, and some of them leave the industry. To control your fear, you can enhance your skills by reading premium content at Saxo Bank. Remember, education is the most important element which can make you a confident trader.

Excitement

This kind of emotion is not so prevalent among Forex investors because everyone is aware of their hard-earned money. This is why they don’t place the trades being too excited. This is observed among those traders who think of themselves as the experts and feel excited about this. This type of emotion can also ruin the trading career.

There are some ways of tackling tough situations and you are required to know about these. Now, we will discuss these.

Develop a trading strategy and stick to it

A trading strategy is regarded as the most important thing that can control a lot of issues related to this industry. A strategy shows the alternative ways during a market recession, and a beginner can easily bypass it and can minimize the losses. Emotions don’t let the investors stick to the strategy. As a result, they are unable to make their progress systematically. While developing a design, make sure that you have added a clear objective, methods of analysis, styles, timeframes, risk management techniques, and so on. Some of the popular trading strategies are – position trade, swing trade, day trading, and scalping. However, for beginners, we suggest you choose the position trade.

Include the risk management techniques

Greedy people generally omit risk management techniques from their lists because they think that including these techniques can lead them to losses. But the actual scenario is not like that. Money management techniques can save an entire day for a beginner by minimizing the losses during a recession. In addition to this, those who feel scared of placing trades should include these strategies to overcome the fear. Some of the popular money management techniques are – stop-loss limit, analyzing risk to reward ratio, risk tolerance limit, lot size, and so on.

Using a trading journal and demo account

Once you feel that you are losing too many trades, we suggest you stop there. It is time to find out the weaknesses of the strategy and build up the confidence level. Use the journal and write down everything about a deal, and on the weekend, analyze them to find out the strengths and weaknesses of the strategy. After that modify those strategies and use the demo account to evaluate the efficacy.

David Robertson