Forex Trading is not for the faint hearted, it will test you and it will either make you or break you. Being able to manage your emotions is probably the hardest part about trading forex in my opinion. You will have good days and have bad days, wins and losses which are – unfortunately – an unavoidable part of trading, and it can be incredibly frustrating and deeply discouraging. As long as you keep your emotions in check on the bad days you should be golden. In order to progress as a trader you the sooner you realise that having losses is part of trading and accept that fact the better it will be for your mindset.
The key points I want to tell you are what has helped me on my trading journey.
1. Take a Step Back and Chill
Wooosaaaaa …… Now while this is far easier being said than actually done it is something you need to learn and learn fast. You will have moments when you want to throw your phone or laptop against the wall but is that really going to solve your calls up? No it really isnt going to achieve anything. At the end of the day you got it wrong, so fricken what as long as your rosk management is in check then it really shouldnt matter. The best thing to do is to take a breather, close the app or platform and do something else for at least 10 mins or until you are calmed down. If you do not do this you will end up revenage trading and possibly losing more trades and more money. I know because I have been there and turned a small loss into a disatorous fucking nightmare.
Losses are part of forex trading – but it’s how you deal with them that counts. The key to this is keeping as calm as possible, and taking a step back to reassess and re-consult your trading plan. I generally walk away from the screen and take 10 deep breaths, and come back to do a full top down analysis of the pair that I got wrong.
Once you are calm take minute to analyse your mindset during the trade. How did you feel? Were you feelign rushed, did you have FOMO ( fear of missing out ). Did the market move completely unexpectedly due to news or data release that you didnt count on? Did you rush into it without waiting for price action confirmation?
Write all these emotions and feelings down in your journal so that you can learn from anything you feel you can change to better your next trade. The reason you want to write down how you feel is so that you can actaully see what caused you to make the mistake and there for learn from your mistakes.
2. Review your trading plan
Did you follow your trading plan and trading rules as you have layed out? If you are new to trading and havent got a trading plan I suggest you check out this article and start one today or if you are relativley new you might need to just go over it and tweak it a bit. Speak to your mentor about how you can adjust it, if it is not suiting your style. A good trading plan should respond to the market and should be something you can follow in all trades, but can be altered accordingly.
Read More: How to Create a Trading Journal
First thing is to stop trading, do not place any more trades until you have reviewed your loss and go over what went wrong. It’s a good idea to reassess your trading plan to see if it can be improved.
Answer these questions.
Did you place your stop loss too low?
Did you set your profit targets too high?
Did you exit the trade too late?
Did you enter the trade too early or too late?
Was your risk:reward ratio according to your trading plan?
Did you check for any fundamental news data coming out?
Did you thoroughly check your technical analysis against your trading plan?
Does your trading plan focus on entry signals without taking exit signals into consideration?
Did you wait for price action confirmation before making the trade?
Did you draw support and resistance levels correctly?
These are some good ways to identify the problem so that you can learn for the next time, and create a better, more robust trading plan.
Trading is not for the faint hearted and it will test you in times when you think you have finally got the hang of it. The most important thing you need to remember is that as with nything in life, nothing comes easy and it will take some time. It takes dedication, hard work and perserverance , so dont give up.
Learn from your mistakes, keep learning, keep growing and you will have the time and financial freedom you are looking to find.