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Tag Archives: fear

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.