Have you ever wondered why you keep losing your money in forex?
When you BUY or SELL, do you enter with a plan in mind or did you just blindly click hoping to make money?
Do you close your losing trades immediately or keep them running until your account is blown?
And do you take it personally every time you lose and start revenge trading causing you to lose even more?
If you answered ‘YES’ to all of the above questions then keep reading …
Most traders lose because they are emotional traders and emotional behavior plays an important role when it comes to the success of this business. Traders also fail to implement a robust risk management plan. Emotional traders and beginners who lack knowledge tend to anticipate feelings when they click on that buy or sell button thinking only of how much profit they can generate rather than measuring the risk to reward ratio before entering and because of this behavior they consistently lose in the market. Another fatal mistake many forex traders are guilty of is that they use wishful thinking instead of doing their homework such as analyzing the charts and checking the Economic Calendar for impactful economic events.
One way to keep your emotions in check is to be fully involved and if you are fully aware of forex trading and you did your homework you would know there are two types of analysis. Technical and Fundamental analysis. Agree?
For those who don’t know Technical Analysis is the study of price movement using charts while Fundamental analysis is the study or looking at the economic developments that can impact the value of a currency.
Now let me give you an example: Let’s say you open your EUR/USD chart and the candlestick you see is bearish and now your first thought is to sell the pair. The candlestick drops a few pips below your sell price, you are overjoyed and your emotions are kicking in heavy followed by greed then FOMO. However, you forgot to check the economic calendar and you’re unaware that in less than 5 minutes the Unemployment Rate figures in Germany are about to be released causing the EUR/USD to jump at least 45 or 50 pips against you causing you to take a massive loss and considering you haven’t even placed a stop loss because you lack risk management you’re now thinking to keep the loss running hoping it will recover the next hour or two but instead the price jumps another 60 pips. The higher the price goes the more stubborn you become because you hate the fact of closing a trade with a loss and before you even know it your account margin level drops below 100% risking a margin call. This is the result you get when you involve your emotions while you trade.
So in order to become successful in trading, you need to first eliminate emotions have patience, get rid of that ‘Get rich quick scheme’ mentality, and only trade based on a strategy and a plan. It is also important that you contain greed, fear, and practice discipline while staying humble. All this is key to mastering your emotions and making money in forex.
Of course, this is not easy but it’s not impossible. Some of the steps to help you achieve your trading goals is by keeping a trading journal next to you so you can note down any mistake and write down a set of rules of Do’s and Don’ts as you learn.
In conclusion, it is worth noting that forex trading requires you to always keep practicing to help improve your trading skills, analyzing charts, and most importantly have self-control over emotions that may break your set of rules and strategy.
Most forex brokers allow you to open a demo account so you can practice and learn until you gain enough confidence to move to a real account.
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