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How Stressful Is Forex Trading for You?

November 30, 2020 by

Forex trading is inherently risky. And where there is risk, there is also stress because it is natural for humans to feel uneasy when involved in risky behavior. However, levels of stress probably vary a lot between different traders. It is also likely that different types of trading events exert different level of stress on traders. The poll at the end of this post is aimed to measure the prevalence of stress among this blog’s readers.

Getting rid of stress entirely is probably impossible and could be even harmful in trading. It is useful to experience bad emotions when you make a mistake — it helps you to avoid it in the future. The problem with FX trading (and any other financial trading) is that not all stressful events are results of mistakes. A good strategy with a winning rate of 50–60% and an average risk-to-reward ratio of greater than 1:1 will result in 40–50% losing trades. It would be totally normal for any human being to feel anxious about each one of those losses, but it wouldn’t be useful to a Forex trader. Those losses are a natural part of the trading process. At the same time, one would be right to be stressed when a trade executed by a mistake ends up profitable by pure luck — it is really difficult to experience anything but joy in that outcome, but from the trader’s perspective it is a very harmful thing to do. While learning to cope with stressful situations is necessary if you want to have a career in foreign exchange trading, it is also necessary to admit that traders need stress to become better traders.

An unstressed Forex traders says that this is fine.

In the ideal case, stress helps us to be disciplined and commit less mistakes in trading. In reality, we, traders, may experience lots of needless stress that doesn’t help us at all. Some traders — mostly newbies who have just transitioned from demo to live trading — worry almost non-stop while they have an open trade in the market. Even experienced traders may still feel depressed on a particularly long losing streak in spite of the fact that such streaks should be expected given their strategy’s win rate.

Increased volatility in a currency pair you trade, unexpected fundamental or political news announcements, slippage and widened spreads, brokerage platform outages, fat-finger errors — there are many factors that could make a Forex trader nervous. At worst, too much stress may cause a serious illness or condition, or even make you abandon trading altogether. That is why it is so important to keep stressful situations under control and your reaction to such events in check.

I personally, feel stressed only when losing a trade which was sized to be much larger than my normal trading plan dictated. To me, it is a good sort of stress. It reminds me that I should always follow my position sizing guidelines and prudent risk management. And how about you?

Do you feel stressed when trading Forex?

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What exactly is causing stress in Forex trading? What is the most stressful part for you? How do you cope with it? You can use the commentary form below to share with fellow traders.

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