Learning how to read charts, having access to the right technology, negotiating the best broker fees, these are all important factors for a new trader to get started on the right foot, but the most crucial factor, which is often overlooked is learning to keep your emotions in check. Trading Forex can be an exhilarating and emotionally exciting endeavor… If not done right. Becoming a successful Forex trader requires you to detach yourself emotionally form your financial decisions. It is often said that you are the words you speak, and if that is to be true, here are some of the things newbie FX traders say, that can kill your trading career:
- “I want to make $3,000 a day trading”. Speaking about potential profits in absolute numbers is pointless. How much are you investing? A possible return on your investment should always be stated as a percentage.
- “This is boring”. If you are trading because you are after the thrill and excitement, this is a dangerous place for you to be putting your money in. Yes, the FX market sometimes moves fast, but if you have your SL/TP levels set properly and sensible risk management strategy in place, FX trading should be boring. And that is a good thing.
- “Always” and “never”. The fact that a certain scenario has occurred in a certain way for the past 20 times, it doesn’t mean it will continue to happen the same way. Things could easily change on the 21st time. If you haven’t seen prices drop sharply yet, it doesn’t mean they never will. Having always (or never) seen things a certain way is no excuse for forgetting to set your SL and TP levels.
- “I hope the price goes up”. Trading should be based on facts, statistics and proven methods, not on wishing, gut feelings or hope. If you find yourself saying things like “I hope”, “I wish” or “I have a feeling”, stop trading now!
- “Should’ve”. Whether you missed a trade, exited too early or stayed too long, beating yourself up too long is dangerous. Crying over spilled milk can lead you to consider changing your strategy based on unfounded facts. You should collect the relevant data on several trades and make educated decisions based on a large sample of trades meeting the same criteria.
- “It’s water under the bridge. Next!” I stated above that you shouldn’t cry over spilled milk, however, you should learn from your mistakes as you move into the next trade. The analysis you do after each session will help you determine how you plan for the success of the next day.