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Control Your Emotions.....!!!

 

 

Did you Know that 90% of all forex traders lose money? Now I bet you are questioning my zeal for trading the spot forex market! If you are just starting out trading this market this not a very good omen. How do you ensure that you become the 10% that succeed, especially if given the fact that so many traders are willing to part with their hard earned cash?

 

There are many reasons for these abysmal stats: lack of discipline, lack of money management skills, and many more. I think the reason for poor success rate is that 90% of the traders can't manage their emotions while trading.This is the demon I fight daily. Money management and discipline are the symptoms, but emotions are the root cause.

 

From day 1 of trading currency markets i have heard every guru shouting at the top of their lungs to cut your loses and let your profits run. Or that anyone can put on a trade, but it is the professional trader that knows when to exit a trade. It seems like a simple concept to let your profits run and take those profits when the markets offers them up to us. But why can't we get this right?

Emotions!!!

The curse of all traders, the last and most difficult skill for us to overcome is to remove the emotions from our trading. Period !! Well i got news for you....You can!!

You, my friend, are a human being and thus an emotional being. OK, so we must trade emotional-less, but that is beyond the realm of most traders.

Letting emotions interfere with your trading can manifest in many ways. Let me just give you some examples of my past (and sometimes present transgressions).

 

1) Taking a loss and angrily reversing my position only to have the market resume in my original direction!the infamous revenge trading!

2) Listening to trade signals from members of my trading group instead of litening to my own signals and intuition (afraid I was going to miss the proverbial boat!)

3) And my personal favorite...

Having the market retrace and return almost to my original entry point, exiting and having the market execute a classic continuation pattern to original target (a target that was selected in advance before the trade was executed).

 

What do we do?

i have been following traders that focus solely on trading the news or other fundamental factors. Although this has some merit it won't do sequal fr checking your emotions. Technical analysis should be your weapon of choice for keeping your emotions in check. Do you analysis before your trading session. Follow your trading plan (money management and strategy) as though your life depended upon it (your account balance certainly does!!). Visualize your trade execution like tiger woods does before every golf shot and above all, trust yourself!

 

I repeat the following mantra before every trading session.

" I am the world's most disciplined forex trader. I trade my Plan and I plan my trade. I trade with confidence and decisiveness. If the reason for me to be in a trade no longer exist I will cut my losses or take profits without any hesitation."

 

I am an emotional person. It makes me feel alive, however when I trade I want to be a stone-cold, calculating pip capturing fool and leave the emotions for ehen I shank a drive into the water at the golf course.:)

Thanks For your precious time.

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A better route for most traders would be to come to a more effective understanding of what an emotion is and then use that knowledge and skill to manage (not control) the emotion. I don't see much success in traders trying to emotionless, resisting the emotion. The more the trader resists acknowledging the emotion, the more the emotion persists and has power. The whole idea is to move away from a historical mindset of attempting to control outcome and retool the beliefs to a mindset of managing uncertainty where probability is normed. Got to work with fear and impulse patterns to rebuild the mind that trades. A few well meaning affirmations aimed at inducing a mindset is a start. The test is if the affirmations lead to solid beliefs that can withstand the rigors of trading. Usually there is much more work involved than envisioning what you want to happen. You need to become the change.

 

Rande Howell

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You cannot control your emotions. We are emotional beings, they are part of us.

 

The experience I've made led me to the conclusion that emotions play only a major role in your trading (i.e. leading to revenge trading or whatever problem), if you do not really understand the rules of the game. If you do not deeply understand the rules, you cannot have confidence in what you are doing. And if you do not have the confidence, you are prone to trading based on your emotions.

 

For instance, if you trade a system or method which you did purchase without backtesting it yourself sufficiently and knowing what to expect from this system long-term (e.g. win rate, max. consecutive losing trades, max. drawdown, etc.) it is only human to get mad after a string of losses. But if you understand the performance metrics of the system or method you are trading, it is very unlikely that your emotions will affect your trading, because you KNOW what to expect from the system/method.

 

Don't get me wrong, you will still get mad about the losses (I do! :) ). But it will much less likely lead to any negative behaviour in your trading. That's what I've experienced at least in my trading.

 

The other thing is that the system or method used must fit to your personality. If it does, it is also much less likely that you do "stupid" things.

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I forgot one other aspect. Emotions play also a role if your position size is too big, making you feel uncomfortable with every tick that goes against you. This hinders reasoning.

 

So, actually your emotions can even help you in your trading as your subconscious is telling you something: "Buddy, your money management is way too aggressive!".

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