Trading Your Emotions: How to Cope with Psychological Pressures
We all like to read about and study the subjects of strategy and analysis and Forex trading. For many traders, that is the familiar, understandable, and easier part of trading. By contrast, emotional control and money management belong to the more arcane category of knowledge in currency trading. On news channels, the websites of brokers and online and visual sources of news and analysis, you often find the various market movements and strategies based on them debated heatedly and with passion, but commentators who are often not traders themselves do not feel so inclined to discuss the psychological aspect of trading in their presentations.
The fact, however, is that the vast majority of online traders fail, and that the main cause of the failure is lack of emotional control and mental discipline. In many cases, the trader does not even reach a stage where a good knowledge of economic data and statistics can support his trading to generate better results. Instead, many accounts get wiped out early, as traders act like scared rabbits in the tense and emotionally charged atmosphere of the markets. Clearly, seekers of success in trading must devote a lot more energy to perfecting their skills of psychological control.
What are we seeking in trading? We seek money, profits. Does money, and the market action that creates it respond to our joy, pride, sorrow, or despair? Are the markets crueler on us when we are sad, or more gentle when we feel invincible? Are we more successful when we trade on baseless optimism, or panicky pessimism? Which is the better way to manage our emotions?
The better way of managing our feelings in trading is to isolate and exclude them while we are dealing with the markets. Prices move according to emotional responses in the short term, and economic dynamics in longer periods. But they can only be evaluated by logic, as that is the only tool possessed by human beings.
And some will rise and say, perhaps justifiably, that the markets move on emotions, and that by isolating and excluding them from our decisions we are losing the chance to understand the markets. In response we say that human beings understand and analyze through reason only, and as emotions cannot be predicted through reason, there is almost no benefit in trying to trade the markets emotional responses. Emotions are unpredictable, we all know that much. What is the point of trying to predict or evaluate market action on the basis of something which is itself unknowable, and unpredictable?
In sum, emotions have no place in a successful trading career. There should be no joy in profit, and no pain or sorrow in a loss. We can enjoy the fruits of our profits with friends and family later, but if we try to enjoy them while trading, our joy will quickly turn to sorrow. Until you absorb this piece of Forex wisdom, do not spend much of your time screening the Forex broker list seeking the best choice for you. The first step to success in Forex is emotional control. Without it, no broker or mentor will help you much.
By Carl Hayes
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