The influence of emotions on Forex brokers
How do you feel today? Happily? Is it sad? Angrily? Calm down? Have you ever thought about how your daily emotions can affect your trading?
This is definitely worth considering. Of course, an essential aspect of any successful trade is a well-proven trading strategy, along with discipline, to adhere to its plan for executing transactions and managing capital. But to develop a strategy, you need a corresponding psychological attitude. You can know a lot about the markets. You can be a specialist in fundamental and technical analysis. You can have a fine intuition on the movements of shares, which is observed in many successful traders. But even the most intelligent, competent, interested traders can be brought to bankruptcy, being unable to take into account the emotional signals that warn of the flawed trade decisions.
Overexertion of positions, too early exit and too late entry: all these are signs of not a mistaken trading system, but an inappropriate psychological attitude to trade. So, what are the parameters of a psychological mood that distinguish a successful trader? Mark Douglas, in his excellent book “Trading in the Zone,” identifies what he calls “the four primary fears of trade” that are responsible for most of our mistakes in trading. Here they are: “fear of making a mistake,” “fear of losing money,” “fear of missing a deal,” and “fear of not taking profits.” He says that the essential difference between successive winners and successive losers in trading is that “the best traders are not afraid”!
So, how do we overcome the fear that many of us naturally bring to the markets? Here are a few suggestions:
- In your analysis of each potential transaction, ask yourself “what have I done to limit the risk as possible?” Risk fuels fear, as it should be. And there are various ways to reduce it. First, make sure that your input price is the best available price on the last movement of the market on which you are trading. If you are trading at a breakout level, be sure to set a stop order outside of the potential return. In case of a refund, wait until the confirmation of this return is received. Of course, the use of reasonable stop orders is always part of any risk management plan.
- Avoid overloading any position. I teach my clients to divide their account into several positions, which they plan to keep at a time, and then only distribute this amount for each trade. And if you have a period of failure, consider reducing this amount. Mark Cook, a well-known S & P trader, wrote this on his computer simply: “Take it Little by Little!” This is good advice for all of us.
- Avoid trading at all when you are in any of the following states:
· You are angry or upset;
· You have financial problems or are worried about debts;
· You do not feel well physically;
· You are 100% uncertain about the direction of the market;
· You feel like a “victim” of the market.
- Repeat the simple but valuable saying “Trade according to plan, and plan trading.” One way to specify this motto is to keep a trade journal. Write down the reasons for entering into a new transaction before you have entered into it, including notes on risk and profit. Upgrade these entries at the end of each day. Adjust your stops and goals accordingly. Markets are very flexible, organic objects, and it is necessary to constantly monitor their evolutionary development, so as not to expect indulgence from them.
That’s all. It’s easy to follow. Stick to the plan. And remember, if you want to trade for a living, you must trade for life!