Trading is a very intensive process that requires intellectual involvement and undoubtedly affects the emotional sphere of an active participant in the financial market. When big profits are made, even an experienced trader is delighted, losses make one feel irritated, anxiety and greed interfere with making correct trading decisions. Many of those who come to Forex are faced with the inability to control their emotional reactions to what is happening.
Impressionability usually leads to negative consequences. No matter how well a trader knows the tools of technical analysis and trading tactics, no matter how accurate the price movement forecasts he makes, his knowledge and skills level out if he indulges in the flow of passions and experiences at moments. critics. Therefore, psychology is so important on the way to success in trading.
Self-control training is one of the key tasks of a trader who is prepared for a long and productive trade. To begin that educational work on yourself, you need to understand what triggers trigger a stressful state.
Reasons for the emotional charge of a trader
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Obviously, there are many reasons for the manifestation of violent emotions both in everyday life and in trading, and all of them are due to individual characteristics.
A trader may be hampered by unresolved psychological issues from other areas of life. If before the work session you could not disconnect from negative experiences, this load dulls your perception and concentration, slows down the speed of information processing, due to which mistakes are possible.
The reason for the acute emotional response to the results of the negotiation may be self-doubt as a basic scenario of the individual. For the insecure trader, making a profit becomes a significant victory over circumstances, and a failed trade becomes an occasion for self-flagellation. Losing, like winning, closes the vicious circle of emotional instability: excitement or depression alike interfere with a sober assessment of current market conditions and cause you to misstep.
In addition, we must not forget that a dynamic and spontaneous market creates in itself a situation of uncertainty that causes mental stress in anyone.
Price spikes create opportunities and potential risks. In an instant, you can close a deal with a huge profit, and in the next few seconds, go into the red. Experienced traders know how to protect their capital, but even for them such bounces become a test, not to mention beginners who can lose their deposit overnight.
Price fluctuations and financial interest encourage you to constantly look at the charts. No matter how provocative it may sound, the movement of the curve in the trading terminal window has a hypnotic effect on many: while the position is open, the trader tirelessly monitors the slightest price changes. And even if he trades on the hourly time frame, he will tirelessly watch the chart every second. Down, up, down… Price dynamics are captivating like a roller coaster. The trader begins to experience the same emotions as in the attraction, and subconsciously likes it.
However, such close attention exhausts the observer. The price rises and falls point by point, the trader sees how the ratio of possible profits and losses in an open transaction changes. Either he is satisfied with the current state of affairs or he begins to experience anxiety. The resulting swing shakes the emotional state of even the most balanced trader. A tired brain allows for distortions: a trader begins to notice entry signals where there are none, closes orders early or changes the stop loss level until he takes big losses.
To minimize such influences, both subjective and objective methods can be used to regulate business behavior.
How to control emotions?
To answer this question, let us return to objective methods. These basic recommendations work regardless of the psychological characteristics of a particular trader. Everyone can put them into service and successfully apply them in their practice if needed.
Tip number 1. Set a goal for the day.
This is where you should start working. The trader will feel more comfortable if he establishes a specific trading plan before opening the terminal. To start with, you can choose the minimum possible daily income and loss levels. For example, a trader has set a profit and loss limit of 15-20 points for himself. As soon as he achieves said increase or loses the designated amount, he necessarily closes the trading session until the next day.
The goal of this tactic is to shorten the duration of the operation. By following this recommendation, it is not necessary to spend a long time on the monitor, intensely observing the change in quotes, which means that the emotional pressure is reduced.
Tip number 2. Use a wide time frame.
The transition to long time frames makes trading more measured. For many market participants, scalping appears to be a more effective strategy. Of course, making money from instant price changes and opening multiple trades at the same time is exciting. However, working on minute and tick charts creates enormous stress.
If a trader prioritizes emotional balance over rapid capital growth through small profits, they are better off trading on a daily or four-hour time frame. These graphs have less noise and a clearer trend. To monitor price movements, it is enough to spend just 15 minutes a day checking.
Tip number 3. Reduce the trading lot to emotionally comfortable values.
This way of minimizing the influence of emotions works in any convenient period of time and is considered the most effective. To test its effectiveness on a live account, experts recommend reducing the lot by 5 times compared to the current standard position size.
Reducing the volume of instruments traded allows you to divert your attention from financial goals and focus on the intellectual side of trading. Without thinking about money, the trader acts more logically. He clearly assesses the market and follows the signals of the trading system, closes trades on time, does not delay unprofitable positions, that is, he does everything right.
Getting consistent positive results instills confidence and reduces ongoing anxiety. As soon as the trader manages to harmonize his emotional state, he can increase the lot again. However, it’s important to do it gradually, constantly focusing on the limits of your stress resistance.
It should be noted here that it is useless to use this technique on a demo account with virtual capital. It does not provide an objective view of the market, financial risks and opportunities.
So, we look at the key ways to deal with emotions. Its introduction into the trading system allows you to make trading more comfortable and profitable. From the market you have to get everything possible to take without losing sleep and composure.