Did you know that 90% of all Forex traders lose money? Now I bet you are questioning my zeal for trading the spot Forex market! If you are just starting out trading this market this not a very good omen. How do you ensure that you become the 10% that succeed, especially if given the fact that so many traders are willing to part with their hard earned cash?
There are many reasons for these abysmal stats: lack of discipline, lack of money management skills, and the. I think the reason for the poor success rate is that 90% of the traders can’t manage their emotions while trading. This is the demon I fight daily. Money management and discipline are the symptoms, but emotions are the root cause!
From day one of trading the currency markets I have heard every guru shouting at the top of their lungs to cut you r loses and let your profits run. Or that anyone can put on a trade, but it is the professional trader that knows when to exit a trade. It seems like a simple concept to let your profits run and take those profits when the market offers them up to us. But why can’t we get this right?
Emotions!!
The curse of all traders, the last and most difficult skill for us to overcome is to remove the emotions from our trading. Period!! Well I got news for you… you can’!! You, my friend, are a human being and thus an emotional being. OK, so we must trade emotional-less, but that is beyond the realm of most traders.
Letting emotions interfere with your trading can manifest in many ways. Let me just give you some examples of my past (and sometimes present transgressions):
Having the market retrace and return almost to my original entry point, exiting and having the market execute a classic continuation pattern to original target (a target that was selected in advance before the trade was executed)!
What do we do?
I have been following traders that focus solely on trading the news or other fundamental factors. Although this has some merit it won’t do squat for checking your emotions. Technical analysis should be your weapon of choice for keeping your emotions in check. Do you analysis before your trading session. Follow your trading plan (money management and strategy) as though your life depended upon it (your account balance certainly does!!). Visualize your trade execution like Tiger Woods does before every golf shot and above all, trust yourself! I repeat the following mantra before every trading session:
“I am the world’s most disciplined forex trader. I trade my plan and I plan my trade. I trade with confidence and decisiveness. If the reason for me to be in a trade no longer exists I will cut my losses or take profit without hesitation.”
I am an emotional person. It makes me feel alive, however when I trade I want to be a stone-cold, calculating pip capturing fool and leave the emotions for when I shank a drive into the water at the golf course.
Happy Trading!!
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BTW, did you see Tiger Woods at the press conference after winning the PGA Championship? A reporter asked him if he expects to win every major he plays. Without hesitation Tiger said “yes.” There was an awkward silence while Tiger waited for the next question and the reporter waited for Tiger to expand upon his answer. I loved it and want us all to trade with the kind of confidence and discipline Tiger Woods displays while playing golf!
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