Whether you’re a seasoned professional or a relative newcomer to Forex trading, the element of risk involved is ever present. Although there is little you can do to completely avoid any risks, your attitude towards that risk can play a big part in your eventual gains or losses.
Control your emotions
If you have studied your markets and developed a strategy then it is important to keep your emotions in check throughout trading. Although you need to be aware of your instincts you must also be able to step out of your mental state to assess the situation rationally. The best forex traders know when to unleash their emotional state and when to keep it firmly in check.
Play the long game……
Whilst it is perfectly possible to get good results from forex trading in the short term, most serious traders would agree that the best gains are to be made from mid- to long-term strategies. The amount of available capital plays an important part of course, but where funds are reasonably limited the most successful traders realise that long-term trading reaps the greatest rewards.
…… but also play for today!
Although traders need to keep an eye out for general trends, the most successful traders are prepared to ‘go with the flow’ and adapt to ongoing developments. Those forex traders who over-analyse every situation are less well equipped to seize opportunities that arise unexpectedly.
Keep an eye on losses
Winning traders keep an eye on the bigger picture, but pay attention to losses as they occur. All too often a less successful trader will focus on gains and fail to see the losses occurring until they have reached dangerous levels.
Stick to one system
It can be tempting to try a system for a while, take a few losses and then switch to a new system. Those traders who continually swap and change in search of the perfect system tend to be the ones who take the greatest losses. The strategy of the successful Forex trader is to analyse where the system failed and how that failure could be avoided in future. In this way, winning traders continually refine and adapt one system until they have fine-tuned it to their liking.
The psychology of success includes the ability to rise above losses without falling prey to extreme stress. Keeping losses in perspective is an important part of a winning strategy and one that losers struggle with. Dealing badly with a loss causes physical and mental stress and can severely impair judgement for future trading, so keeping a cool head is a vital part of the winner’s toolkit.
Understanding your approach to risk is an important factor when deciding whether forex trading is right for you, so make sure that you prepare yourself mentally for success from the outset.