Forex Trading Psychology - The Fear Of Losing
In Forex Trading, the fear of losing can be like water. The right amount can give life but too much can level cities (and trading accounts).
There’s a pattern among great traders that you see when you start to research their beliefs and habits towards trading. Let me tell you for free, a lot of them… HATE losing, they can’t stand it. They do everything in their power to avoid taking a loss. A lot of people take that on the surface and start playing to NOT lose. Make no mistake great traders trade to win but they let the fear of losing motivate and better them, not STOP them.
Take the Shot! Fear of losing can cripple a lot of beginners and even seasoned traders that have just taken a string of losses into not being able to take the next trade. You’ve been burnt before and you’d hate to be burnt again. If your risk management is right, calm down, breathe, and remember that each trade is unique from the last one and that you can’t win if you don’t play.
Great traders lose too. They just found the cheapest way to do it. When they lose they don’t ponder over that past trade, they are already focused on preparing for the next trade.
There was a study conducted that included professional racing drivers and regular old “I-Have-A-License” Drivers and put them in a simulator and let them go around a track. They found that at every turn the regular drivers would be focused on the apex or corner they were APPROACHING while the pro drivers were already focused on the corner AFTER the one they were approaching.
That needs to be your mindset with every trade (easier said than done) but being able to pull the trigger amidst a drawdown (a string of losses) is key to prevent missing opportunities that will bring you out of the drawdown.
Take it on the chin… or duck!
Great Traders, I’m talking the Ray Dalios, George Soros, Cohens have all been recorded saying they hate losing. NOT that it stops them. It literally fuels them to find ways to lose less. Not every trade has to end up in a big loss if you’re wrong. Find a way to move on from that sucker quickly and swiftly. A loss does not define your trading skills. Your edge does.
Work that edge till its blunt on both sides. Be Dispassionate! Indiscriminate! Towards bad trades or trades that just aren’t working out (Check out how to cut the L and Keep the W). Don’t get out of a trade because it went 2 points against you. Find a price point on your chart that can help you determine that you’re wrong and cut the trade if it gets there. DO NOT second-guess, DO NOT move your stop and make it bigger, MOVE ON to the next better trade.
Don’t bet the farm.
Don’t lose your shirt.
Cut the L.
Keep the W.