The subjects of trading psychology and your mindset aren’t given enough credence when the subject of FX trading is discussed. It’s impossible to calculate the impact your overall state of mind can have on your trading outcomes, due to it being an intangible factor that’s impossible to assess. Within the spectrum of trader-psychology fear is paramount and fear (in relation to trading) can manifest in many forms. You can experience the fear of losing, the fear of failure and the fear of missing out (FOMO). These are just three definitions that can be filed under the subject of psychology and you need to quickly put in measures to control these fears, in order to progress as a trader.
Fear of loss
None of us traders like to lose, if you’ve decided to take up FX trading as a hobby or potential career then (in simplistic terms) you’ve taken the plunge to become involved to make money. You’re either looking to: supplement your income, to put your savings to work, or to eventually become a full-time trader after a period of intense education and experience. You’re taking these steps because you’re a pro-active person who wants to materially improve their own lives, or that of their loved ones through financial gains. As such you’re a competitive person, therefore, you don’t like losing. You should be aware of and embrace this diagnosis as it’s an extremely powerful force that will help you stick to your target and ambition during the times when the going gets tough.
However, you must quickly learn to not take losses personally, accept that losing individual trades is part of the price of doing business in this business. Elite level tennis players don’t win every point, international footballers don’t score from every shot on goal, they play a game of percentages. You need to develop the mindset that winning the prize isn’t about having a 100% failsafe edge, it’s about developing an overall strategy that has positive expectancy. Remember, even a 50:50 win loss strategy per trade can be highly effective, if you bank more money on your winners than you lose on your losers.
Fear of failure
The majority of traders will go through various stages of trader metamorphosis, when they initially discover the trading industry they’ll approach trading FX with boundless enthusiasm. After a short period of time as they’re becoming conditioned to the industry, they begin to realise that becoming familiar with every aspect of the industry including: the complexity, terminology and skills required to become successful, will take far more time and dedication than they originally anticipated.
You can remove the fear of failure by accepting various truisms in relation to trading. You will not ultimately fail if you control your money-management through tight risk control. You will not fail because after a short period of exposure to the retail trading industry, you will have learned new skills of analysis which can prove to be extremely useful if you transfer your skills to other job opportunities; just consider for a moment the exponential awareness of economic matters you’ll be subjected to. You will not fail because you’ll have gained knowledge that will stay with you through life. You can only fail at trading if you don’t respect the industry and don’t dedicate yourself to the task. If you put in the hours your chances of success will rise exponentially.
Fear of missing out
We’ve all experienced the emotion of opening up our platform, loading our charts and specific time-frames and seeing positive price-action relating to an FX pair that has passed, market behaviour that would have offered up an extremely good profit-taking opportunity, if we’d been in a position to take advantage. You must adopt the mindset that these opportunities will come again, there’s often a random distribution between various patterns which can offer up profit-taking opportunities. You need to ignore the fear that you’ve missed out and might miss out again.
If you’re concerned that opportunities could pass you by during your sleeping hours then invest time to develop an automated strategy through your MetaTrader platform, that could react depending on certain price levels being hit. The forex markets are dynamic, continually changing and evolving as economic and political events occur. There will never be a one-off opportunity that you failed to take advantage of, opportunities are infinite in the most liquid and largest market on planet Earth.