Trading the forex market requires good psychology. When you trade the market, you’ll face yourself in different winning and losing situations. And controlling your emotions during the winning and losing trades can be difficult.
Those situations can affect your trading performance if you don’t control emotions and trading psychology in general. As a forex trader, especially if you’re a new trader, controlling emotions in the foreign exchange market can be difficult.
And in this article, you will learn some tips that can help you overcome the emotions in forex trading and improve emotional discipline.
Trust your analysis
When you trade currency pairs on the forex market, you open these trades based on your analysis. But sometimes your trades could be affected by your emotions. For example when you see trades shared by other traders, and if the trade direction predicted by other traders is different from your open trade, then your emotions begin to be more intense.
The reason why your emotions start to be more intense it has to do with your profit or loss. You may think to close your trade or open another trade because the analysis from the other is different compared to your analysis. And to avoid closing the trade on a loss, you close the open trade.
But after some hours, when you check the currency pair chart, your trade could have gone in your predicted direction. And you would not receive the trade profit since you closed the trade as you got affected by other trader’s analysis.
So we suggest you trust your analysis and do not let other trade ideas affect your trading decisions. Viewing trade ideas by other trades can be useful if the analysis is done correctly. And it can help you avoid any further losses, but you should do your own analysis from yourself and trust your analysis.
Stick to your trading plan
Having a forex trading plan is crucial in your trading as it can help you to become a successful trader. And sticking with your trading plan during the winning or losing situations is important. Beginners in trading are affected often by the emotions, and when you close the trade on a profit, then you may not stick with your trading rules.
You would open another trade as you think you’re a better trader since you closed trade in profit. But the consequences of not sticking to your forex trading plan can affect your trading performance and emotions in general.
The other trade you opened, could end on a loss and thus your emotions will start to become more decisive for your trading.
You would react to the market by opening more trades and emotion would affect your trading decisions. Moreover, your further trades could end on losses too and trading emotions would affect your forex trading performance.
So, sticking to your trading plan can help you avoid these situations and transform into a professional trader.
Overcome the greed
Greed can be difficult to control, especially during a winning trade period. If you have currently a trade opened that’s moving according to your market direction, then greed can affect your emotions. You will open another trade to make more money since your trade is going to your predicted direction. And the second entry price on the trade would be away from your first entry price.
The entry could be 20,30, 50 pips, or even more pips than your winning trade currently. But if the market price moves against your trade direction, then your entire profit from the winning trade could be worth nothing. And a second entry on a loss could start a losing streak, and you could end trades on losses that affect your trading account balance.
Greed can affect your trading account and forex trading strategy in general since you could open trade with a higher lot. And by doing this, you will try to make money on your trades by risking more than it’s needed. During this situation, you’ll have uncontrollable emotions and can push to commit different mistakes.
Greed could affect your risk management and the greed can push you to become an emotional trader. Overcoming greed can be challenging, but with the example that we showed, then you could improve to overcome greed and emotions.
Relax and take breaks
To trade the forex market requires a good amount of time in charts. Scalp traders (scalp trading) and day traders (day trading) are more active in trading as they need to check the market more often due to the shorter timeframes. And by staring at charts more often than it’s needed it can affect your forex trading psychology.
Your forex trading psychology would be unstable as you don’t do a lot of activities and “emotional trading” could start to be more effective. During a bad period when you end trades on a loss can be difficult, but taking a break and relaxing is very important.
Continuing to trade after a losing period could affect your psychology. It’s recommended to do different activities that can help you overcome the emotions during these situations. The best way to overcome the emotions after winning and losing trades are shown below:
Go for a drink with your friends
Play any sports
Go for a walk
Play video games