How To Avoid A Mental Breakdown In Forex Trading
Forex trading can be very stressful if you allow it to. In my experience, certain things are definitely going to contribute to Forex being a stressful venture.
If you just note these and try to manage them, Forex can be a good challenge and test your limits without breaking you down and forcing you to reconsider your existence.
The aspects I’m going to mention should serve as a reminder to more experienced traders and will definitely help newbie traders avoid some pitfalls that some traders have had to learn the hard way.
Cut Your Risk
In Forex, a lot of the time, when we find ourselves with scrambled brains or enough anxiety to make you want to crawl into a ball, it is because we have too much risk on a trade or on the table across many trades, which is a bad place to be.
The risk we place on any one trade shouldn’t be so much that you feel this way.
Yes, everyone has a different tolerance for risk, but anxiety and stress is your body telling you that you are way over your limit for risk tolerance.
Almost all traders get into trading to make money, so the idea of taking smaller bets is not appealing because smaller bets mean less money.
This idea has one fatal flaw, which is the idea that you will win all your bets or even most of them, which is not the case even for very profitable Forex traders.
You should expect to lose at least half or more of your bets, especially as a beginner.
When you do lose, you don’t want to lose vast amounts of money or a significant portion of your capital, so it would be wise to cut your risk, so you don’t blow your accounts if you happen to experience a string of losses.
Prepare for them because they will come. So if you feel emotions bubbling up inside you when you are in a trade, cut your risk. I promise you will feel much better.
For those that feel this way while trading a demo account… stop it.
I’m not trying to make small of your problems if you feel this way, but if you have this problem while trading on a demo account with no real risk involved, your problem might not be risk tolerance.
Your problem might be the need to be RIGHT or the fear of being wrong.
Try and understand that profits in forex trading do not come from you being right. You have no control over price in Forex and cannot possibly know with certainty what price will do.
NO ONE DOES. Your job is to manage risk and trade a system with an edge. You don’t need to be right all the time. Also, cut your risk anyway because it’ll never hurt you more than trying to risk more than you’re comfortable with
Find/Build A Strategy That Suits Your Schedule
Forex trading is one of those professions where there are many ways to skin the cat (Not literally), but there is no one right way of trading in Forex.
There are different strategies for different types of people. Read more here.
If you know you have a job or don’t have the time to look at your Forex charts a lot throughout the day, then trying to trade a scalping strategy or even some day trading strategies may not work for you.
It will stress you out every time you miss opportunities to trade especially profitable ones that leave that sour taste in your mouth of what could’ve been.
A strategy you can execute consistently will help you keep your sanity and not feel like you’re falling behind every time you miss a trade.
A system can have the most fantastic edge and the highest return in the world, but if you cannot execute the trades, then it is worthless, at least to you.
If you know you only have time to review charts and manage positions at the end of every day, then maybe invest your time in learning or finding a profitable swing trading strategy.
Many profitable Forex traders swear by swing trading, and it is definitely easier for people with limited time to follow a swing trading system than a shorter-term one.
If you feel like you can’t keep up with the system you’re currently, and you feel a bit of burn-out from chasing all the signals, maybe try and adjust it to be a longer-term system because missing trades is never fun for anyone.
How To Gamble
This ties in with the first paragraph a little bit, but what I mean by learning how to gamble is learning to let go of the expectation to be right.
Anything can happen in the Forex markets, no matter how good your system is, but people usually don’t approach trading in that way.
They have a tendency to expect a winning trade every time they press the BUY or SELL buttons.
If you hit a hot streak in a casino, you wouldn’t suddenly think you were God, would you? Well, at least no one with a good idea of how risk works would.
You would still be well aware that you have every chance of losing the next hand, the next play, or the next trade.
Keep your head small, and don’t get too big for your boots. This is what professional gamblers do.
They don’t HOPE to win. They know they will win at some point because it’s only a matter of time when you deal with numbers, but they don’t pretend to know which hand will be a winning one.
They keep themselves in the game by not being convinced they are right. The more you expect to be correct, the bigger you are going to bet. Who wouldn’t?
So keep that in check, and you’ll survive the losses and be able to stay sane.
Don’t bet the farm.
Don’t lose your shirt.
Cut the L.
Keep the W.
In Forex, a lot of the time, when we find ourselves with scrambled brains or enough anxiety to make you want to crawl into a ball, it is because we have too much risk on a trade or on the table across many trades, which is a bad place to be. Just Cut your risk.
Forex trading is like professional gambling but better. Always calculated and never without an edge.
You’ll never know unless you try right? If you have already given it a shot, chances are you know if it’s something you want to continue investing time in.