Whether you are dealing on the Forex market or any of the other financial markets, trading can be a very stressful activity at times. The main problem is that whether a trade goes for you or against you, it can affect your emotions in a profound way, and this can lead to you to behave in an erratic fashion. Needless to say, letting your heart rule your head is rarely an effective trading strategy, but if you get too emotionally involved in what you are doing, it can be difficult not to fall into this trap. If you are making lots of small trades throughout the day, this can magnify this issue, as you might be on a roll one minute, and making a big loss in the next. When things happen quickly like this, it can be very difficult to keep your emotions in check. Even if you have set down a specific trading strategy that you plan to stick to, it can be hard to execute it when you are overwhelmed with emotion.
The ideal state of mind for any forex trader is one of calm and peace, maintaining an objective viewpoint throughout. The mind and body are inextricably linked, and what goes on in your mind can affect your body and vice versa. There are several ways in which you can make changes to your mental state by taking simple physical steps, such as adopting the correct upright posture, breathing deeply, and drinking plenty of water to stay hydrated. All of these steps can lead to a greater feeling of well-being, leaving you better equipped to deal with the emotional roller coaster of trading.
When your emotions get the better of you, it can have an incredibly negative impact on your trading results. For instance, you might be tempted to take profits as soon as you make them, disregarding your trading plan in the process. Now, if you were only ever making small profits, then this would not necessarily be a bad thing. However, the chances are that you are going to make a few losses as well, so you need profits just to break even, and if you want to make a net profit, your profits have to be larger than your losses. With your emotions running wild, you might be a lot more inclined to take the sure bet rather than letting your profits run, as every small profit provides you with an addictive emotional boost, but this type of trading behaviour is almost guaranteed to make you lose money over the longer term.
By the same token, you shouldn’t let losses send you into a panic either. A few losses in a row can make you feel like everything is going terribly wrong, and this could lead you to make poor decisions or even give up trading altogether. However, most successful trading plans make provision for losses, and even if you lose out on a few trades, it shouldn’t affect your Forex trading. If you keep an objective viewpoint throughout, whether you are winning or losing, then you will be far more likely to make a profit in the long term.
One way to counter emotional over-reactions is to have your trading plan in front of you as you trade, as this will remind you of your long-term strategy. Another thing that can help is to enter your stop losses and profits target into your trading platform, so that you do not have to constantly watch currency prices in case they drift beyond affordable loss thresholds. Keeping a constant eye on the market can be a good thing, but it can also be a bad thing, as if you get too involved it can make you anxious, and therefore more likely to make poor trading decisions.
Another thing that some traders do to keep stress levels down is to play a little music in the background. The best type of music for this is soothing instrumental music, such as classical, jazz, or easy listening. Try to avoid music that is loud, abrasive, discordant, or lyrically dense, as these may distract you and place you in the wrong frame of mind for trading. You could also try tidying your trading desk to make more room for yourself. A messy workspace can make you feel more stressed than you otherwise would be, so don’t overlook the setting when you are trading on the Forex market.
While you may not have the time or space at work to embark on a Programe of meditation, you can use some of the key techniques in order to improve your trading performance. Having a mantra, which is a short phrase that you say to yourself in order to put yourself in a meditative state of mind, can help you to feel calm. While it is best to find one that is personal to you, you should try to find a phrase that calms you down, such as ‘Everything will be fine’ or ‘Give the system a chance to work’.
The aim is to distract your mind away from the causes of stress so that your body can have a chance to recover. If you can distract yourself for long enough that your heart slows to its normal resting pulse rate, then your mind will calm down accordingly. Other activities that can be used to distract and calm you include guitar playing, stretching and even juggling.
Markets are fundamentally unpredictable, so the best chance you have of beating them is to stick to your trading plan, and try to maintain a calm, alert state of mind and body. A stressed trader is much more likely to make poor decisions than a relaxed, objective one, so if you are feeling stressed out, stop trading and get away from your desk for a while. This will help you to maximise your profits and enjoy the experience much more when you come back to it.
By: Clint Starr-Clint Starr is a part of the digital blogging team at ForexTrading.net who love writing about big finance brands and Forex trading news.
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