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How To Control Your Emotions When Forex Trading

Learning to trade Forex is hard enough, but that is only half the battle. Learning to control your emotions when you trade is another skill that you need to master in order to become successful.

Many traders can trade demo accounts quite successfully, but when it comes to trading with real money they fall apart. This is because they trade emotionally when real money is involved.

I have been trading for many years but even i trade emotionally from time to time. I think it is impossible to completely remove emotion from your trading, but learning how recognize it and how to control it will be a real benefit to your trading.

If you find that you are having problems with emotional trading there are things you can do to help.

Fear and greed are the 2 main emotions that you have to deal with when trading. Lets look at fear first.

Fear is basically a fear of losing your money. If you are struggling with this then the first thing to do is to reduce your lot size, or your price per pip. If you are trading with more money than you are comfortable losing then you will be trading emotionally. I don’t like losing, and to be fair i don’t have many losing trades, but they do happen, and every time you enter the market there is a chance that your trade will be a losing trade, and if you are not comfortable with your potential loss you will trade with the fear emotion.

The next thing you can do is to take more trades. I know this may sound a bit weird and a lot of traders will tell you to take less trades, but this in my opinion will just compound the problem, as taking less trades will make you focus more when you do trade, and make the trades you do take more emotional, and you will also miss out on some good set ups, which will again add to your frustration. Taking more trades with smaller lot sizes will help your emotional trading problems.

Lets now look at greed. Greed is harder to master than fear in my opinion. Lots of traders will talk about risk reward in Forex trading. Where you have to have a 2 to 1 risk reward ratio to be able to take a trade. This strategy will compound your greed problems. A good way to deal with greed is by taking less pips profit per trade.

For example if you are targeting 30 pips per trade take 25 instead. If you are targeting 15 pips take 10. Get used to taking less pips per trade and you will feel good about it, and be more in control of your trading. A winning trade is a winning trade no matter how small the win. Waiting for your target to get hit will not help your greed problems, especially if the market reverses 5 pips from your target. Taking less pips and getting more winning trades will also help your fear problems too, so its a win win scenario.

Knowledge is also a big part of helping to combat your emotions. If you are trading with a tried and tested Forex trading strategy, and you understand what is going on in the market, then dealing with your emotions is a lot easier to do.

I hope that this post has helped you understand the importance of controlling your emotions in Forex trading, and given you some ideas on how to manage your emotions.

For further help with managing your emotions please consider my Forex training and mentoring course info here.

Lovely Price Action Trading Today. 3 Trades 119 Pips Profit.

We had some nice price action trading set ups today.

First trade of the day was EJ long at 11933 up to 11963 for 30 pips.
Next trade was Euro short at 13389 down to 11343 for 46 pips.
Last trade EJ long at 11889 up to 11932 for 43 pips.

Markets have gone a bit quiet now, so i will be calling it a day. I have a nice target on Cable for tomorrow that will hopefully get filled. I will keep you posted.

Have a great trading day.

Goldman Sachs Says Buy Euro Dollar To 137.

The Euro Dollar rallied strongly yesterday on the back of a buy recommendation from Goldman Sachs, with a price target of 137. This buy recommendation came about an hour after a sell recommendation from another broker at 13270 targeting 12950. I cant remember who it was that made the sell recommendation but it played nicely into the hands of Goldman who i am sure were accumulating long positions on the back of it.

This is why i don’t trade news. You could have got caught out big time yesterday if you were shorting down to 12950.

Euro dollar has rallied significantly in the last 2 days so i am expecting a bit of a retrace late Monday or early Tuesday. We may take out yesterdays high on Monday before a retrace is seen though, so don’t go short until you have a clear reversal signal.

OK, trading update for the last 2 days.

Thursday we had 2 trades. First trade was Cable short at 16066 down to 16051 for 15 pips. We also had another Cable long trade at 16036 up to 16096 for 60 pips.

Yesterday we had 3 trades. First trade was Euro short at 13283 down to 13253 for 30 pips. Next trade was Cable long at 16109 up to 16151 for 42 pips. We then took Cable short at 16151 down to 16103 for 48 pips.

Update for the week as follows. 13 trades. 401 pips profit.

Nice start to the new year. 🙂

If you want to get your Forex trading year off to the best possible start, please see my Forex training course here.

2 Nice High Probability Trades Today. 79 Pips Profit.

We could have had a handful of trades today but for one reason or another we did not get the correct set up. Today was a good trading day, i am a little miffed that we did not get more pips in the bank, but i only take high probability trades and if my targets do not get hit then i cannot take the trade im afraid.

Its frustrating sometimes when this happens but you have to try and forget about it and move on to the next opportunity.

I will give you an example of what i mean. I had been waiting for a long trade to set up since last Thursday on EJ. We nearly got what we were looking for yesterday afternoon but the price bounced off a support level around 15 pips from my entry and scuppered the trade. I called it a day at around 10.30 yesterday evening to watch some TV, as the markets were a little quiet moving into the Asian session. I checked the charts again at around 11.15 and saw that EJ had pushed down 45 pips to within 3 pips of my entry in the space of half an hour, and proceeded to shoot back up 100 pips over the next 3 hours. So i was not a happy bunny going into today. 🙁

Anyway, I did make up for it with 2 nice trades today for 79 pips profit.

First trade of the day was Cable long at 15996 up to 16030 for 34 pips.
Second trade was EJ short at 11500 down to 11455 for 45 pips.

As i said we could have had a few more nice trades today but my levels did not get hit so i could not take the trades. Oh well tomorrow is another day, with more opportunities for pips. 🙂