Managing Disappointment in Forex Trading

One of the biggest challenges in forex trading is managing disappointment. In this article we will discuss how to neutralize any onset of trading disappointment This destructive trading emotion is the source of both trading losses and a large amount of stress.

Let's look at how disappointment can ruin even a good trade. For example, you enter a short forex trade on the EUR/USD and the price quickly hits your profit target of +40 pips. You feel pretty good about your results until you see that the price keeps going and you could have had a much larger gain. So now instead of viewing your +40 pip gain as a positive thing you now start to view the trade as a negative because "You could have had more."

So, if you're not a disciplined trader, you start to look at ways to get back in the market to "earn the pips that you just missed". Your next trade is a loss, so now your disappointment is snowballing because you could have had +125 pips on the 1st trade, or at least the +40 pips that you originally took - but now you are at only +15 pips for the day because of your most recent loss. If you're not careful at this point your disappointment could result in even more losses.

I can easily cite this example because it has happened to me more than once. However, I have learned a few simple (not necessarily easy) steps to help keep trading emotions in balance.

Solutions

Let's begin by determining why we are disappointed in the first place. Disappointment comes from an expectation. My wife, who works in the counseling field, has often stated that an expectation is a premeditated resentment. I believes this applies to trading too. So, if we expect ANYTHING from the market we are setting ourselves up for disappointment & resentment. So the 1st step is remove all expectations with regards to our trading.

Secondly, once you feel any sense of regret or disappointment after a trade - Close your trading platform until the feeling passes. This could be a short time period or even for the rest of the day.

Once your emotions are more balanced re-open your forex trading platform & WAIT for the next good trade based on your clearly defined trading system.

So you're saying simply stop trading once disappointment sets in?

Yep! Like I said it is simple but not necessarily easy.

A good test to use is if you're still thinking about your last trade...

then you're not quite ready for your next trade.

Why Forex Expert Advisors Don't Work Long Term

Maybe you're like me and have spent countless hours & money testing various mt4 expert advisors - only to find that they don't work long term. They all seem to work for a period: weeks or even months - but then the EA becomes very unprofitable.

The main problem with expert advisors is that most of them will work for only certain market conditions and as markets evolve over time (sometimes very quickly) the EA doesn't adapt to be able to remain profitable. The forex trading market is a living breathing organism with a mind of it's own. Yes, trading is based on patterns and trying to predict what will happen next based on the currency's trading behavior - but what do you do when the trade patterns are constantly changing?

The concept is great - plug in a $99 piece of software and allow it to make all of your trades. Then sit back and watch your account grow into a million dollars in the next 12 months.The goal is to generate profits in the forex market without becoming attached to a trading screen all day. However, I believe the old adage "if something seems too good to be true - then it probably is" definitely applies to using MT4 expert advisors.

Some trading systems use a high stop loss of 300 pips and they are able to "show" great gains for awhile. But sooner or later these automated 4x trading methods all experience high losses. Our goal with Forex Success Recipe is to have a higher avg win than our avg loss.

All of our real-time trade alerts are generated by a live trader using a live account not simply by a piece of software. Now we have some of our trading strategies that are semi-automated but it is our experienced trader that decides when to use any particular strategy.

We actually use a set of free expert advisors, but these EAs don't place any trades - they simply help us manage the trades after they are placed.

In conclusion, to further illustrate my point - please visit the New York Craigslist site & look at accounting/finance jobs and see if there are any trader jobs listed. You will find (most of the time) companies that are still hiring live traders. If the companies with the latest trading technology and the most sophisticated algorithms are not simply trading with bots then that should tell us something.

Manage Daily Risk With Free Forex Trading Expert Advisors for MT4

For quite some time we have been using a set of FREE MT4 expert advisors to help manage some aspects of our trading. We do NOT completely depend on an any EA to issue new trades but for things like setting TP & SL, moving stop loss to break even, and managing daily risk - these are great free tools.

We found these from a company called MQLHome.com. We thought we would pass this information on to our Forex Success Recipe subscribers & blog readers. There are actually 5 free EA's and they all can be found at this web site.

One of free 4x EA's that we use is called the MOMT 5 EA. We use it to manage our max daily risk. To use this MT4 EA - install it on your trading chart per the instructions. You will be able to set the max daily gain and the max daily loss. We do not use the maximum daily feature - so we simply set that value very high.

To calculate your maximum daily loss for your 4x acct - simply multiply your account balance  times your preferred daily risk amount. For example, if your forex trading account has a balance of $2,000 and your only want to risk 5% per trading day - then you would input $100 in the "Loss_Limit" input field.

Now once your cumulative loss for the day reaches $100 - the EA will automatically close any other order that is opened for the rest of the day. This is a very powerful tool to prevent a large daily drawdown from taking place in your account.