In the trading world, emotions are considered the enemy of traders. Studies have shown that the biggest difference between profitable and unprofitable traders is how well they control their emotions. When getting into a bad trade, the trader who can manage his psychology well will be able to minimise the risk or turn it into a good trade, while the trader who is emotional may make the situation worse.
Therefore, knowing how to control your emotion is highly necessary to succeed in Forex trading. Let’s find out the tips to do so in this article.
- Have a Trading Plan
In Forex trading, the surprise is the factor affecting our psychological stability the most. Often, you will lose your calm if the market surprisingly goes against your expectations.
One of the best methods to ensure discipline while trading is to have a plan. If you can plan your trades, then surprise can hardly be an issue.
Therefore, take time to plan each trade and your response to each situation that may take place in those trades. Besides, don’t forget to prepare your reactions during drawdown periods and think about what you will do if there are consecutive losing trades. Anticipating different situations will keep you ready to cope with sudden changes, and thus control your emotions better.
- Understand That Loss Is Unavoidable In Forex
No matter how good your trading system is, there will always be times that the market turns against your predictions. During the periods when losses grow, your brain releases a stress hormone called “cortisol” which greatly affects your thought, memory and rational decision making. Your perspective on reality then starts to be distorted by emotions.
The best method to inhibit your emotions during losing periods is to remember that losses are inevitable in Forex. There’s no trading system which can ensure a 100% winning ratio, so don’t be nervous when there are losing trades happening.
- Take Time to Rest
Trading can be one of the most stressful jobs in the world – you have to simultaneously compete with thousands of opponents through the trading platform. Therefore, if you don’t care for your health, you’re unlikely to maintain stable trading psychology, which accounts for more than 60% of your success.
Many traders spend too much time on trading and analyzing the market. They think that the more they trade, the more profits they can make. It’s completely wrong. Trading too much, in fact, causes your psychology to be unstable and brings worse results in the long run.
The professional trader is never being a slave to his monitor. Instead, he spends more time on his hobbies or for his family, and only trades when his mentality is comfortable.
Therefore, if you want to manage your emotions better, take more time to rest. Don’t always think about trading. When you have a healthy mind and body, you can easily overcome your negative emotions and make more accurate trading decisions.
The Bottom Line
Above are the 3 tips to control your emotion better while trading Forex. Let’s tie everything up:
- Have a trading plan
- Understand that loss is unavoidable in forex
- Take time to rest
It’s always easier said than done, so don’t despair if you can’t immediately control your emotions with these tips. Take your time to practice; with consistency, you will gradually control your emotions better over time. Trading forex with easyMarkets provides you with advantageous trading conditions and a comprehensive learning centre to help you develop your knowledge.