Have you ever gone through a rough patch in your forex trading and apparently couldn’t figure out what was going wrong? You’ve probably encountered a few streaks here and there, but you eventually got it back on your feet by making the necessary adjustments. However, if you cannot pinpoint the root of the problem, you are likely to have an even more difficult time recovering.
As you go through this situation, the chances are that the pressure to get back into the black will make it difficult for you to assess the problem. Instead of being crippled by fear, first, ask yourself the following questions:
- Am I acting badly for not following my trading plan?
- Do my feelings cloud my judgment?
- Have market conditions changed, and what do I have to do to adapt?
Aside from failing to stick to your Forex trading plan, your trading slump could also be explained by other more common issues among newbies. Below are three of the most common types of trading problems that newbies often encounter:
1. Lack of education
To blame for this is the excitement of making tons of profit in the trade, but some newbie traders are jumping guns right away and trading real money on a live account without practicing their skills in the demo. An inexperienced trader can spoil an account faster than you can say “Margin Call”. For this reason, we recommend newbies open a demo account first.
You see, demo trading allows beginners to get their feet wet without putting their hard-earned cash on the line first. This enables them to get a feel for the market environment, optimize their trading plans at their discretion, and practice appropriate risk management. Without proper education, you may be missing certain clues in the market, such as chart patterns, Japanese candle formations or changes in market sentiment.
2. Emotional trading
Even seasoned Forex traders fall prey to emotional trading from time to time. Emotional noise can take the form of unchecked fear, hope, or greed.
These emotions, in turn, manifest in harmful trading behaviors such as over-trading, over-trading, truncating winning trades, and losing trades.
3. Changed market conditions
Sometimes the problem is not with your trading psychology but with the change in forex market conditions. You may be much disciplined and do everything according to plan, but if your approach to trading does not suit the market environment, you could still be in the red.
You see, children, there are many possible reasons your trade could be suffering. You may be trading badly because you are not trained enough, are not acting emotionally, or market conditions change.
Remember, diagnosing your problem is the first step in fixing it! The better we can pinpoint the root of the problem, the better we can address it. If you focus on acquiring skills, you will probably solve most of your trading issues. Many traders face loss amid greed and fear. If you control your emotions while trading, you will be able to stay disciplined in trading.