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How to control emotion while trading? You Should Know.

Forex Forum, Best emotion control tips while you trading.​


How to control emotion in forex trading

Our emotions have a significant impact on the decisions we make. Trading is all about making decisions of what to buy, what to sell and what to hold. Most traders have a hard time controlling their emotions. Many of them have even blown up their trading account because of lack of control on emotions.

In this article we will discuss about how to control emotions while trading. Also, we will mention the exact actions to take when you think you are unable to control your emotions.

What is emotional trading?​


Emotional trading is when a trader or investor lets personal feelings and emotions impact their decision-making. Sometimes it can be helpful, but usually bringing emotion into trading is a bad idea.

Psychology

Trading Psychology is considered to impact and affect up to 95% of overall trading success. When we think about trading in terms of psychology, this is knowing when to enter a position and when to not enter a volatile market and leave the market alone.

A trader is their own worst enemy when it comes to Forex and it is their responsibility to come to terms with that. The trader is, after all, the chief decision-maker so it's up to the trader to introduce adequate measures to protect open positions. For learn more about forex trading psychology, you need to visit forex forum. Forex forum is one of the best places for learn proper about forex.

Here are some tips, how you can control your emotion in forex trading:​


1. Greed

The general definition of greed – excessive desire for more of something than is needed.

In forex trading expecting a higher return is the worst mistake you can ever do in your trading career. Greed prompts you to take trades continuously without realizing that the market will be open again tomorrow. So as a result of this trading behavior traders often ended up fall into overleveraging and overtrading. So, you have to avoid greed in forex trading.

2. Dealing with a losing position

No matter how diversified and well-tested a strategy is, there will always be times when it's sitting in the red. When losses start to grow, the emotions will distort our perspective on reality.

Cortisol is released by the brain – this is a stress hormone that interferes with thought, memory and rational decision making. This process is very subtle and happens below the level of conscious awareness.

3. Using stop orders

Stop orders are very unique tools that have been designed to help both the busy trader as well as the emotional trader. But its biggest advantage is that it helps you take control of your greed when trading, or more specifically removes greed from the equation completely.

Essentially what these orders do is help you set a specific price point of a financial instrument and register it on the software as a place to either buy or sell something automatically. For Learn more about stop-loss click here...

4. Remember the past

When the stock market dives, remember that this isn't the first time it's happened.

"The stock market has overcome so many obstacles," said Goldberg, pointing to 9/11, the Great Recession and the market crash of 1987.

"What happened each time? The stock market recovered and claimed new highs."
So, Remember the past when you will start trading. It's can help you to control your emotion in forex trading.

5. WAIT FOR A CANDLE TO CLOSE

A trader must not catch a candle which is still open. An open candle provides misleading signals which will leave you in a mess. Do not let your emotions drive your decisions while trading. Many times, these misleading signals are the reason for losing trades.


6. STOP TRADING AFTER TWO CONSECUTIVE LOSSES OR WINS

A trader starts feeling like a loser after two consecutive losses. Since they don't want to lose, they start doing revenge trading. Similarly, a trader feels invincible after two consecutive wins. They think today they cannot lose at all and they start taking some fast and bad decisions without proper analysis. So, a trader should stop trading after two consecutive losses or wins to control their emotions.

7. Overconfidence

If you hit a rich vein of winning trades, as your strategy works favorably during the current market conditions, overconfidence can rear its head. This can have many negative side effects, but the main one to be aware of is over trading.

The importance of emotion control in forex trading

THE IMPORTANCE OF CONTROLLING EMOTIONS WHILE TRADING​

The importance of day trading emotional control cannot be overstated.

Imagine you've just taken a trade ahead of Non-Farm Payrolls (NFP) with the expectation that if the reported number is higher than forecasts, you will see the price of EUR/USD increase quickly, enabling you to make a hefty short-term profit.

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

You think back to all the analysis you had done, all the reasons that EUR/USD 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 – this is the 'Fight or Flight' instinct.This impulse can often prevent us from accomplishing our goals and, for traders, this issue can be very problematic, leading to knee-jerk reactions.

Professional traders don't want to take the chance that a rash decision will damage their account – they want to make sure that one knee-jerk reaction doesn't ruin their entire career. It can take a lot of practice, and many trades, to learn how to minimize emotional trading. Learn more about forex trading emotion control at dailyfx.com

Instead, use time to research the factors that influence markets rather than relying on intuitions and guesswork. Or analyze your trading plan and see how it can be improved.

Even so accept that you can do all of the analysis in the world, and do everything possible but sometimes the market just won't go in the direction you expect it to. Accept that there are always circumstances that cannot be foreseen.

You can learn more about forex trading strategies and currency trading tips at forex.forex

Thank You
 

MarnieLarge

Active member
The most essential practice to avoid losses in trading is to control your emotions. You can utilise your demo account to tame your greed before entering the live trade. Meditation also works for a few traders.
 

geraldinemarsh

Well-known member
Agreed! You cannot move ahead if you can't leave behind the burden of your emotions. It's not about how many trades you enter and exit in a day. It's about how much profit you are taking home day in and day out. If you think it's difficult for you to keep your emotions at the door, stay away from trading and come back when you can.
 

Lateral Thinking Forex

Well-known member
Imagine you've just taken a trade ahead of Non-Farm Payrolls (NFP) with the expectation that if the reported number is higher than forecasts...
That would be a silly thing to do, in my opinion. Attempting to trade the NFP really amounts to nothing more than gambling. If you're looking to "make a hefty short-term profit" then you may as well try the casino. ?‍♂️

I removed all emotion from trading when I stopped using stop loss orders on my trade positions and now I don't need to worry about being stopped out due to short-term market volatility. I have conviction in my trade ideas and so trust my strategy and manage drawdown in other ways; i.e. using a grid.

Controversial, I know... but I'm contrarian in most aspect of my life. :sneaky:
 
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somrat4030

Well-known member
I can't agree with this point, strategy can lose or wins in series, if you start to interfere with strategy behavior, you can't compare actually results with backtest. Regards Greg
sir, i understood what you mean. But if any traders continuously trading after losses, then he can loss more money on that time, in my opinion. For this i think he need to break a little bit. Moreover, this point will helps traders for control their greed also.
 

Profesor Pips

Well-known member
ok, what if a newbie abandons a certain way of trading because of two losses in a row but is actually unaware that this is the way that suits him?
 

somrat4030

Well-known member
ok, what if a newbie abandons a certain way of trading because of two losses in a row but is actually unaware that this is the way that suits him?
After losses two time, he need takes some breaks. because, after losses if trade continuously, then if he losses her money for third time, then that will be very saddening for him, in my opinion.
 
Most people forget about emotion control while trading. After losing a certain amount, when they look back at their trades, they are shocked to find that they made silly mistakes just because of their emotions at that moment.
 

Snicket

Active member
Beginners are going to find this post very useful. Because the traders who struggle with emotions are mostly beginners. They are not able to suppress their anger, fear or greed, which results in trade losses.
 

Lateral Thinking Forex

Well-known member
I would suggest sticking to longer time frames is a good way to control emotion, in that you won't need to be looking at the charts all the time and any intraday volatility will be smoothed out. Most new traders spend all day looking at charts and tend to overtrade.

Start with the daily time frame and maybe only trade two currency pairs at a time, waiting for the close of the daily candle. Check in every 4 hours during the day if you must but always switch the screen off and walk away again.

And more importantly, trade small... almost all negative emotion associated with losing trades comes from trading too big a lot size. If you're going to use a stop loss, use a lot size calculator tool to ensure you always risk 1 or 2%, regardless of the amount of pips to your stop loss.

And finally, be disciplined. Stick to your own set of rules and approach trading like a job and you can banish almost all emotion from trading; i.e. make it a mechanical and repeatable system. The more boring and simple your trading becomes, the easier it is to make money. :)
 

peter9461

Well-known member
Great post, controlling your emotion while trading is also very essential part of handling trading losses as well. It what set new and experienced traders apart as either you recover from it or you give in to greed and loose your account.
 

WalletInvestor

Well-known member
I love this post! It is extremely important to be aware of and manage our emotions when trading. I think many traders underestimate the importance of learning about trading psychology and implementing elements of stress relief and personal development into the learning process of trading.
 

Wisecrack

Member
Emotions play pivotal roles during trading as it is inseparable from a human mind. It is practically impossible to switch off emotions and then trade. So in order to make trading decisions backed by well-thought and carefully analysed strategies, it is essential to learn how to manage emotions like greed, fear and revenge etc. Some of the techniques that have been effective for me are maintaining a trading journal, meditation and revising all my trades.
 

GlenWest

Active member
Uncontrolled emotions make you a bad trader, and sometimes you don't even know it. After losing a few trades, many traders get on with the next trade, without analysing the previous trades, which can lead to revenge-trading.

Emotions are critical in a trader's life. You can't turn them off but can control them if you follow stringent trading rules.
 

somrat4030

Well-known member
Uncontrolled emotions make you a bad trader, and sometimes you don't even know it. After losing a few trades, many traders get on with the next trade, without analysing the previous trades, which can lead to revenge-trading.

Emotions are critical in a trader's life. You can't turn them off but can control them if you follow stringent trading rules.
every traders should control their emotion while trading. It's very important for every traders.
 

Polakandil

Well-known member
Emotion maybe becomes the big enemy that comes from own selves, emotion as human nature, but because forex trading involved psychology and the psychology can lead to making trader become emotional, hence need to control it with various ways, stop trading after loss is also good to prevent from trades based emotion, because when trader face loss trades, usually they want to recover the loss in a short time and possible then make them in wrong decision.
 

Lateral Thinking Forex

Well-known member
You can't turn off emotions. It's not a switch! But you can control it with a good set of trading rules, including the use of target profits and stop losses.
Agreed about sticking to a good set of trading rules. I have traded the exact same strategy for 5 years now.

However, I disagree with the use of stop losses. I think they cause more emotions such as stress of being stopped out etc. I much prefer to manage my trades using a grid / averaging... a more investment style approach to trading FX.

It's not for everyone but it's what works for me and keeps emotion out of my trading. Controversial, I know. :)
 
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