Handling one’s emotions is the single most essential factor in determining whether or not you become a consistently successful Forex trader.
Setting yourself up for forex trading success depends upon a trader’s ability to consistently make decisions that are completely uninfluenced by emotion. When interacting with the market most traders become influenced by how they are feeling, it is overcoming this mistake of letting our feelings about the market influence our trading that fosters a successful trading mindset.
Trading success is about mind and emotional control
Traders are often told they need to control their emotions to achieve success. While this is well and fine, most people that preach this gospel never really tell traders HOW to do this. Different situations require different techniques for controlling one’s emotions. Since trading involves having your money on the line and it possibly going up and down, for and against you, before the trade ultimately plays out, it is critical that you not allow yourself to be influenced by this natural ebb and flow of market movement once you enter you trade. Even IF you manage your risk extremely consistently and only risk a tiny portion of your account on each trade, if you sit there and watch your trade play out after you have executed it, you are probably going to induce your “old” brain and begin to feel emotion.
This is why you need to plan your trades thoroughly before entering them, leave no stone unturned, cover all your bases prior to putting your money on the line, and then let the trade play out with minimal involvement. The primary way to avoid trading with the “old” more primitive fight or flight brain structures, and make sure that you trade with the “new” objective thinking frontal lobe part of the brain, is to make 100% certain you plan out your trade before you enter it.
You essentially have to “outsmart” your own brain by realizing and accepting the fact that you will never be MORE objective and logical than when you are NOT in a trade, therefore this is the BEST time to plan your trade out. Staying in this objective mindset as much and as long as possible is what makes a trader consistently profitable. Since your trading accuracy directly depends on your ability to remain objective when making forex trading decisions, and objectivity is a function of planning your trades before entering them and NOT looking at them for hours on end as they unfold, it goes to reason that there is an inverse correlation between time spent looking at the markets and trading success. Meaning, assuming a certain basic level of Forex trading knowledge, spending increasing amounts of time beyond this level, either analyzing market variables or watching your trades play out, will cause you to lose money over time. Time to Set yourself up for Forex Trading Success.