Oil Crumbles, Cable Reverses and the Dollar Continues with Bullish Structure. Bull Flag Break Opens Door for Continuation. Gold, USD Strong Inverse Correlation and in Confluence. FTSE Further Develops Range on Sharp Turn Lower. The goal of this article is not to make trading seem less difficult; but rather to highlight the fact that many new traders can often-times become their own worst enemies, making trading even more difficult than it already is.

To illustrate how this can happen, try to think back to the last time that you were very angry; the last time that you were really mad about something. This is a trait that can often hinder us from accomplishing our goals.

NFP comes, and just as you had hoped — the number beats forecasts. But for some reason, price goes down!

You think back to all of the analysis you had performed, all the reasons that EURUSD should be going up — and the more you think, the further price falls. As you see the red stacking up on your losing position; emotions begin to take over.

These are often the same emotions we feel if we had just been in a shocking accident, or a fight with another person.

In psychology circles, the fight-or-flight instinct is often regarded as being a key part of the human psyche; built to protect us in times of stress. In some situations, when the mind deems the situation as too stressful to attempt to manage — we run.

In other situations, in which the mind feels as though we can make an impact with our actions — we fight.

This is often why we do or say things we regret when we fight with each other; in some cases, it really is out of our control. This is the fight-or-flight instinct; always part of every one of us constantly seeking to protect us in times of stress. In trading, we can get quite a bit of stress. When a position begins to turn against us, that's when we begin to feel it. The red arrows on the chart accompany all the fears of failure that rush through our brains in nanoseconds. As the loss continues to stack against us, that stress becomes more and more profound; making the concept of taking action even more intimidating.

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And this is precisely how our fight-or-flight instinct can negatively affect us in trades, as we allow ourselves to make decisions in extremely stressful states that, often-times, don't do us any favors. Bad trades are often reactions, while good trades are often decisions. They often go through much practice, and many trades in an attempt to soften this emotional reaction to the stress of an open trade. Below are some of the ways that can help traders do this.

One of the things that professional traders do to ensure discipline during these trying times is to plan out their approach. There are many strategies, and approaches that can help traders accomplish their goals.

Planning each trade, and planning how you want to react in each situation that takes place in those trades can greatly help a new traders manage the emotions that come with speculation. In the DailyFX Education group, we get to work with many new traders. The differences between new traders using a trading plan , and those not using a trading plan were shocking: So shocking that we wanted to produce resources so that any and every trader interested in writing a trading plan would have everything they need.

I wrote an article outlining many of the areas of the trading plan that traders may want to pay focus to. Compiling a trading plan is the first step to attack the emotions of trading, but unfortunately the trading plan will not completely obviate the effects of these emotions. Below are a few ways that traders will often attempt to mitigate this damage. In the DailyFX series, Traits of Successful traders — David Rodriguez, Tim Shea, and Jeremy Wagner set out to discover what separated those who were successful from those who had failed in the Forex market, and the research was shocking.

In the Number One Mistake Forex Traders Make , David Rodriguez found that, shockingly, retail traders were right MORE often than they were wrong; meaning that they were actually on the right side of the trade more often than not. But what was even more shocking was the fact that, in many cases, traders were taking losses TWICE that of the gain that they were making IF they were right.

The unsustainability of this type of plan should be obvious. And keep in mind, for every one loser that cancels out two winners. Needless to say, this is a scenario that many traders have a difficult, if not impossible time digging themselves out of.

The thesis of the Number One Mistake Forex Traders Make is: This may have special importance to scalpers and day traders, but the Loss Limit has been used for years in an effort to prevent a bad day becoming even worse.

After losing trades, we often feel negativity. I can not even begin to count the number of new traders that have come to me, regretfully, after blowing an account on one currency pair in a single trading session simply because they were chasing prices. What usually happens with these folks is that after placing a few losing trades, and getting nowhere really fast, they increase the trade size.

While there is the chance that the trade might work out for you, the fact of the matter is that you are making quick, short-term decisions about future price movements.

The Importance Of Trading Psychology And Discipline

In the DailyFX Education Course we offer a full module on Money Management, with a full profile and set of rules for new traders to use. Lower your l everage. One of the easiest ways to decrease the emotional affect of your trades is to lower your trade size.

Remember how it felt the last time you placed a demo trade? Increasing the trade size, or velocity, will often increase these stress levels as traders are allowing each individual trade to carry to great of an impact to their trading account. After the trade moves against our trader only 14 pips, the usable margin is exhausted, and the trade is closed automatically as a margin call. In this case, the new trader has simply put themselves in a position in which the odds of success were simply not in their favor.

Lowering the leverage can greatly help diminish the risk of such events happening in the future. Master the Concept of Greed-Free Trading 46 of The Most Important Trading Psychology Skill for Traders. You can follow James on Twitter JStanleyFX. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

Market News Headlines getFormatDate 'Wed Jun 21 Technical Analysis Headlines getFormatDate 'Wed Jun 21 Bull Flag Break Opens Door for Continuation getFormatDate 'Wed Jun 21 Gold, USD Strong Inverse Correlation and in Confluence getFormatDate 'Wed Jun 21 Education Beginner Intermediate Advanced Expert Free Trading Guides. Click here to dismiss. Get Your Free Trading Guides With your broad range of free expert guides, you'll explore: News getFormatDate 'Wed Jun 21 News getFormatDate 'Tue Jun 20 How to Manage the Emotions of Trading getFormatDate 'Fri Mar 16 Then think about what caused you to be mad.

Forex Trading Psychology: The Four Demons of Trading Psychology

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