Fear, Greed, and Hope are the three emotions you have to overcome, control, and tame to become a successful forex trader.
If you are struggling with your trading, you don’t need to go far, check within you for these three culprits.
Besides marriage, there’s nothing in my life that has made me feel alive and dead in equal measure, each taking its turn to rattle me – like trading. One moment you are elated, the next, you regret why you started trading.
The sight of losing and the promise of making money will enlist a part of you that defies logic and reason. I could swear forex traders are under a spell. Most of us do dumb things that we wouldn’t dare tell our spouses.
The emotional undercurrent inside each one of us is responsible for our trading behavior.
You’ve got it. I’ve got it. Heck, that’s what makes you and me human.
Without it, we would be like the algos and EAs entering and exiting trades without a whim.
No one would be thrilled about losing money. And most certainly, no human would feel like a mump when they are making shitloads of money.
But, admitting and massaging your humanity may not make you money trading forex.
If you are new to trading, this may not make sense yet.
It’s good you are here. Learn, Heed, or the markets will drive the point home. Either, way you will learn and heed the price you pay is your choice.
Those who’ve been trading and feel the market throws them in a washing machine every chance it gets, there’s no escape, this is the part of you that you have to tame to succeed trading.
And the sad truth is that no system or fine-tuned strategy can succeed in the hands of an emotion-driven trader.
So, you want to become a successful trader? Here again are the three emotions you need to overcome, control and tame; Greed, Fear, and Hope.
Greed in forex trading.
Greed in trading is the intense and selfish desire for money.
The emotion of greed leads the pack of emotions raining havoc on trading accounts.
A trader overtaken by greed throws all logic aside and chases the market with lot sizes beyond what their system dictates. They want to make all the money now, and so, will use a larger than planned lot size – over-leveraging the account trade after trade, eventually overtrading the account into negatives that they will not come to terms with.
When that happens, the next emotion kicks in effortlessly.
Fear in forex trading.
The dictionary definition of fear is an unpleasant emotion caused by the threat of danger, pain, or harm.
Fear to a trader manifests itself in several scenarios.
Fear to loose. Like your head is on a chopping board if a negative appears in your statement. So you either don’t enter trades, or you toss your trading plan aside(if you have one); remove stop losses or add one more trade onto a losing trade or close a profitable trade fearing the market will come for the little profit.
You can’t deny it; it is painful to see a 10% loss. Such a loss is a threat to our account. So, you cover your head in the sand like an ostrich; you add to a losing trade with bigger lot size, you adjust or even remove a stop-loss limit, One problem, what you fear most often happens – you end up losing anyway beyond your tolerance limits.
Fear to miss out. You see a candle shooting, and you are like, “heck, I can’t miss out,” hoping to cash in on the move, you jump in only for the price to reverse. Ouch, that hurts.
Hope in forex trading.
Hope is a feeling of expectation and desire for a trade to go your way.
You remove a stop loss – you hope that price will go back.
You don’t accept a defined profit – you hope to make more money.
You add to a losing trade – you hope that price will reverse just a little bit to make up for the loss.
You enter a trade too late or too early – you hope that the price will go your direction.
You break all the rules – you hope – just this one time – the market will see your need for money.
These three emotions feed themselves; one leads to another, which leads to the other perpetually working together to siphon money from a trading account.
At one point, you’ve got to draw a line; enough is enough.
And walk the dreaded journey to bring your emotions subject to your trading strategy.
Now let us look at how to overcome and control trading emotions.
How to overcome and control greed in forex trading.
Understand the dynamics of trading; believe, with time, you can compound your account to your dream figures.
You don’t need to over-trade or over-leverage your account to make money.
Set your mind to trade for a long time – compounding works.
Think about this, $1000 will turn to $13,290.99 after one-year trading aiming for only 1% account growth a day with a 0.5% risk. On a large account, you should aim for less than 0.2% of your account.
This goes without saying, risk an amount of money you are willing to lose – if a 1% loss sets your belly on fire, cut it, go down to 0.5%, cut it down further until you don’t feel the pinch of a loss.
How to overcome and control fear in forex trading.
Fear strips you of control. It freezes you in the middle of a trade, like a dog hit with a flood of headlights in the middle of a road. Feeling hapless and lifeless, all you can do is stare at the screen.
What’s your fear? Face it.
Is it fear to lose? If it is, you are yet to accept the reality that each trade you make has two likely outcomes; a win or a loss. That is why you need a strategy tested over time and proves that wins eventually cover the losses.
If you are confident of that, why would you fear to enter a trade when your strategy signals you to?
Why would you fear to cut a loss when the charts are screaming, cut, cut?
Why would you leave profits on the table because you fear the market will come for little gains?
Change the mindset that the market is there to take and take from you. The market is indifferent. It takes from undisciplined traders giving it to disciplined traders.
I dare you to become disciplined and prove it for yourself.
Is it fear to miss out?
Until you hear of an apocalypse, know the markets will still be there tomorrow. There is no need to jump in when you don’t need to.
Wait for the next setup; it always comes.
If you hate missing the highs or lows, trade with pending orders set at high probably support resistance levels.
How to overcome and control hope in forex trading.
When hope is at play, you make things up. A strategy does not guide you, so what the charts show is irrelevant now.
Hope will make you money some times, but disciplined adherence to a trading plan will make you money, every time.
Tame your fear and greed, and you will not need to hope for the market to give you money when you break the rules.
If you have reached this far, heard this sage advice I wonder how many times, but your emotions still lead you. You feel stuck and stumped.
What do you do?
- Quit trading. Seriously, if you fail to tame and control your emotions, you will never succeed at trading. Trading is not everyone like most of us could never fly an airplane or tango.
There’s neither shame nor harm in walking away – there are plenty of other ways to make money in this life.
We’ve all been told, “winners never quit,” but the truth is that winners know when to quit.
- If you believe in the vehicle of forex trading for financial freedom, subscribe to a vetted, social trading platform.
There are many of those: exness, etoro, and many others.
Managed accounts remove you from active involvement in the markets so you can rely on other traders’ expertise to make money.
- If quitting or letting someone else trade your money are unfavorable options, then you’ve got to get your hands and feet dirty.
Accept the reality that you and your emotions are one, you can’t do away with them, but you can tame them.
Remove all the conditions that put your emotions to the driving seat.
You can only do that when you trust and trade by your trade strategy and plan, always.
If you are ready for the journey, you need to do two things.
The two solutions to all emotional trading problems.
Only trade with a trading strategy and trading plan. You are either trading with a plan or trading with your gut. Gut trading is 100% led by emotions.
A trading plan brings a routine check to each trade you enter. Like pilots go through the pre-takeoff checks, as a trader, you should check before you enter or exit a trade meets all your trading conditions.
Try that for a week or two, and you will see your equity curve rising consistently.
Keep a trading journal. A trading journal is a trader’s best friend. No trading system is perfect; a well-kept journal will perfectly reveal the problems with a system or a trader.
In your journal, provide entries for the emotional state of each trade you take – for both entries and exits.
Jot down any thoughts associated with your trades, even the seemingly unrelated events like someone rattled you on your way to work by cutting you off the road – this speaks to your state of mind on that trading day.
At the end of each trading day and in your weekly trading reviews, go through your journal. You will be surprised at the emotions that bring you down.
Like a mirror, you will know what emotional issues need work. Your job in the next trading sessions is managing those emotions.
Unrestrained emotions will always ruin a trader.
Emotions are intangible, mental, and psychological aspects of humanity – you solve them by renewing your mind.
You can not wish yourself to emotional sanity and discipline; you have to work tooth and nail, Monday to Friday, one day, one hour at a time.
The tools you have are your trading strategy and trading journal.
A journal especially allows you to keep track of your emotional state. If there is a problem with your trading, a problem quietly eating your capital, a journal will show you.
Religiously keep one, track every emotional state of each trade, and over time you will be the lead and make better trading decisions.