Have you ever thought of ways of overcoming fear in forex trading? Well if you haven’t, please read on.
Let’s take some time to analyse what “fear” is. We know it’s some kind of emotion, but what really is it. As Wikipedia puts it:
Fear in human beings may occur in response to a specific stimulus occurring in the present, or in anticipation or expectation of a future threat perceived as a risk.
The keywords here are stimulus, perception and risk. Now that we know what fear is, let me ask you one simple question: Have you ever feared trading? If you haven’t it means you’re still on a demo account. We all probably have. In this article, I’m going to try to tackle a few ways we can overcome fear when trading forex.
Don’t Trade More Than You can Afford to Lose
Fear in forex trading is a trader’s response to the perception of losing money. No one wants to lose money, but we as traders want to make money. So how do we eliminate fear? If you look at the definition of “fear” above, you’ll notice the keyword “risk”. This just means one thing; that to eliminate fear we HAVE to be ready to take risks. Taking risks means we’re accepting the fact that we can sometimes actually lose some, if not all of our trading capital. That’s why I always say that in forex, never ever try to risk more than you can afford to lose. If I earn say, $20,000 every month from whatever source, personally, I can comfortably afford to lose $5,000 without crying. With that said, I wouldn’t trade more than $3,000 each month. So if you take the first step of actually trading less than you can afford to lose, you’re making an important step to becoming a successful trader.
Start a F*cking Trading Journal!
So with one thing out of the way, let’s try to consider the remaining options of overcoming fear when trading the foreign exchange market. Forex is not gambling. Those who treat it as such will lose eventually. So to eliminate fear, one more thing we can do is to actually be sure of our trades. When you’re entering a trade, ask yourself: “Do I have a signal?”. After getting the signal, ask yourself again, “Do I have two or more signals supporting my first signal?” If you answer yes to these questions and place a trade, would you have a reason to be afraid of the trade going against you? You won’t! But if you happen to be afraid even after answering in the affirmative to those questions, then it means you don’t have a trading strategy, and even if you do have a trading strategy, then it means you don’t trust it enough. And why don’t you trust you own strategy? It’s because your strategy is not mature, it has not been tested. So what do you do in this case, build a strategy, test it for a lease a year, NOT on a demo account but on a real account with about $1000 (assuming you earn $20,000 from the scenario I sited earlier). I have said this in most of my articles that trading demo is OK but only if you want to test or learn about some MT4 tools or how your trading platform works. Building a strategy will require real money (though minimal amount) to work to make sure your emotions, which are also part of a strategy, are tested!
In essence, the above suggested ways would be my go-to ways to overcome fear when trading forex. You first trade as little money as possible, and while you’re at it, you build a strategy. You can just get a diary and log all your trading activities in it. But your logs should be detailed. You can record things such as wins and losses, time, what events were occurring at the time of trade, which signals you observed, what indicators you used and how you observed them among others. Doing this with as little money for say, a year will be enough to have taken you through all the events that influence the forex market. The following year, you’ll actually be ready to face the same events again by just consulting your logs. And that’s the basis of building a successful strategy that you can trust and follow to eliminate fear.
I would share more tips if I had time but if you like this piece of information, please share them and feel free to post your views and experiences in the comments sections. I’m running a mentorship program with one-on-one live calls via Skype. If you’re interested in taking part, feel free to send me an email: pips @ 24forexsecrets . com (of course without spaces).
All the best 🙂