Avoid Emotions to Become a Better Trader
Most forex traders fail due to lack of emotional control. To avoid emotional decisions each trader should follow a well-developed strategy based on analysis, research, and education.
Fear, along with greed and hope are the main trading emotions that make the forex market move. Because of our natural fear of losing money , fear could be considered the market’s number one emotion.
Several types of fear often emerge in the course of trading whether consciously or unconsciously, these emotional responses include:
- The fear of failure
- The fear of missing out on potential profits
- The fear of losing everything or impending doom
Greed can also cause a person to act erratically, one may stay in a losing position beyond the time when an objective trading strategy would call for an exit. This obviously results in a larger loss which then ultimately exhausts your capital.
Most people are not aware of how greedy they really are until they start trading. Having a realistic profit forecast can help overcome this emotional obstacle to success.
Hope can be one of the most damaging market emotions to a forex trader’s success because hope can coddle a forex trader into holding onto a losing position in the hopes that the market will come back. The market has already proven the trader wrong, but hope makes them stick with the losing trade, often leading to disastrous results for their trading portfolio.
Only by controlling your emotions can you stay focused on your trading goal: maintaining a consistently profitable long-term strategy in the middle of many smaller short-term wins and losses, even when these short-term outcomes seem overly distracting.