How to Stop Self Defeating Forex Trading Habits

Trading is about 5% mechanical and 95% psychological. If you can win the mental battle then you can win at any type of trading (forex, stocks, bonds, commodities, etc)


Here is today's Mental Trading Challenge


Stop trying to "Beat The Market"- Trading isn't a video game!


I remember when I was younger I would play Pac-man or Galaxian at the local arcade. I would keep trying to get a higher score until I ran out of money. Fortunately I never took too much money with me to the arcade. This mindset is ok when you are playing a video game - but it is Not OK when trading.


This concept seems simple - but what is the first thing most people want to do after a losing trade? Most traders want to hurry up and trade again to win back their previous losses. This is called Revenge Trading and it almost never works! If you are revenge trading then what you are doing is continuing to pull another quarter out of your pocket to play the game again - except the trading losses are a lot more than a handful of quarters.


This mental trading obstacle can become an even bigger challenge when trading the Forex Market. This is due to margin availability, the speed of the market, and the ability to place a lot of (losing) trades in a very short period of time.

Here Are Some Solutions:

1. Have a well defined trading plan that you are committed to following 100% of the time
2. Decide how much you want to risk per trade and per day. For example, you may decide to risk 2% of your account per trade and a total of 6% per day.
   I have found that using a max daily risk saves me from the self defeating behavior of revenge trading.
3. Close your forex trading platform when your max daily loss occurs. This removes the temptation to get back in the market. Clear your mind and try again tomorrow 
4. Use a proven and effective forex auto-trading strategy. This method will completely remove your emotions from your trading.
5. Learn more about Trading Psychology by reading a book called Trading In The Zone by Mark Douglas. This book is a must read for any serious trader.

  

Missed Train - Free 4x Tips & Strategies

This is another article that deals with a very basic concept of currency trading that for some unknown reason seems incredibly difficult to master (speaking from my own trading experiences)

I like to use simple scenarios to explain some of the huge forex trading pitfalls:

Missed Train

How often have your turned on your 4x trading platform and seen that you "just missed" a good entry point. I mean if only you were looking at the charts 5 minutes earlier - you would have surely gotten in the trade and it even looks like it would've been a good trade too!

So what do you do? You decide, that even though the price is 20 pips away from your original entry point, to still get in the trade anyhow. I mean it really seems like the trade has potential - right?

WRONG! What too often happens in these situations is the trade reverses right when you enter because you are now entering the market at the wrong price. Logic has left the building and you are now trading from pure emotions.

You have entered the trade because you're feeling that you just missed out on a great opportunity.

I call this tip Missed Train  - because have you ever just missed a train? Did you jump down on the tracks and begin chasing the train? What if you REALLY needed to catch that train - would that have caused you to actually Chase The Train?

Any sane person would say: "No! I would never chase a train down the tracks!" But how many of us perfectly sane & intelligent forex traders chase a trade that we just missed.

The next time you allow emotions to take over because of the "trade entry that you just missed" - simply think: Missed Train & wait for the next TRADE to come along.