To illustrate this, let's think about sports for a minute. Both Forex trading and sports involve a high degree of mental focus. However, all sports include some type of limits. For example, in football you have 4 downs to get at least 10 yards and in baseball you get three strikes before you're out. Also, basketball gives you 24 seconds to make the shot or at least hit the rim.
Can you imagine any one of these games without the limits or the rules? It would be chaos and certainly not any fun to watch.
The rules in sports also provide the athletes a "mental break." Sometimes a coach will even step in and put an athlete on the bench - even if for a play or two. The coach is not necessary punishing the struggling player, but rather the coach is actually helping the player. Coaches understand psychology very well and often the player will come back with stronger mental acuity after his time out of the game.
Well, since Forex trading doesn't have any built-in rules - we have to create our own.
This is another crucial piece of Forex trading psychology. It's important to set some type of limits on each trading day. The currency markets are open 24/5 - so they do not provide any type of limits to prevent over trading. In addition, most traders do not have a coach "to take us out of the game to give us a mental break."
Therefore, we must be able to manage ourselves and know when to STOP trading for the day.
Here at The Forex Success Recipe, we use some specific rules to control our risk such as using a Max Daily Risk. If we ever reach -50 pips for the day - then we stop trading for the day.
However, some trading days require more of a subjective rule. For example, when we are negative from a few trades and then we still manage to at make at least a few pips - then we will often take the small gain and call it a day.
This can be compared to a football team that is on the 5 yard line and keeps struggling to get into the end zone. After multiple attempts and the failure to score 7 points, they will go for the field goal and settle for the 3 points. Even though the team didn't get the touchdown, they are still mentally better off by at least getting some points.
Even trading days with little or no gain should still be viewed as positive trading days. Maybe not in financial profits - but rather in the preservation of your mental acuity. Keeping your trading mind sharp is a must for your long term forex trading success.
