How To Gain Confidence As A Forex Trader?
Confidence is one of the key aspects that a Forex trader needs to actually TRADE. A lot of people have a hard time understanding that confidence comes with time and back-testing!
Regardless, it will take some chart time and consistency in executing your trading plan/trading strategy over a large number of trades.
Like anything, this will take a lot of will power and consciously making an effort to practice some sort of trading routine daily! CONSISTENTLY, are you getting the theme here?
Confidence doesn’t land in your lap from Day 1 because, to put it simply, you have never done this before! And you will only grow in belief as you the results come.
The problem occurs people begin trading without a plan or a strategy that has a negative expectancy, which means you have little to no edge and after a long period you are guaranteed to lose money. When this happens, the consistent feeling of nervousness and uncertainty is logical.
There is no way you can feel confident about something that is not working for you! So how do you get something that works for you? Build and TEST a strategy or pay for a reputable teacher to teach you what THEY have built and tested.
But the very first step is to get together a trading plan, something you can execute consistently, something with rules YOU can follow because the difference between a strategy working for one person and not another is down to which of those two people can follow the rules of that trading system
Why is confidence so important in Forex trading?
Confidence is the only thing that can help you pull the trigger when you are in a drawdown. Plain and simple. You need that special something that can help you push through when the going gets tough. Something to help you push BUY or SELL when you are in the red for that week or that month, whatever your trading personality, and that something is CONFIDENCE.
Confidence that what you are doing the market actually works and that over the long-term, you win! The funny thing is that winning creates that feedback loop and makes you believe you can do it, that’s the feeling you need to carry with you during a drawdown.
But as explained above confidence in a losing system will break anyone mentally. So you must do your homework on the system or approach you decide to use when trading. And whatever that approach is, remember to stay consistent so that your confidence in the system and yourself can grow.
Confidence can be bad too
Confidence only becomes bad when it turns into arrogance and pride. Those are two things that do not belong anywhere near your trading! Confidence becomes bad when you begin to think that you are untouchable and that you are immune to losses.
This usually occurs after a trader has had a winning streak or a large winning trade. This game is all psychological, keep yourself in check between your ears because as soon as that goes, so does your trading.
If you are aware that you’re on a high from a big win or a string of wins, take some time to appreciate what you’ve done because a loss will come I GUARANTEE you, but it does not have to be a life-threatening loss if you manage risk.
A great way to tell if you’re becoming overconfident and disaster is near is if you stop following your rules to the tee. In the beginning, you have to be almost monk-like with your discipline until good trading, which means following your system, becomes a habit and almost second-nature. Until that point, use your rules as a gauge for when you’re feeling over-confident.
Being wrong shouldn’t sway you
This is a common obstacle that a lot of traders struggle to get over and they are not alone. Being wrong in the Forex market does not determine how much money you make. The determining factor is often how much you lose when you’re wrong vs. how much you win when you’re right!
As a trader, especially as a beginning trader, you will be wrong a lot of the time. Attaching your confidence to whether you were wrong or right in a trade will not help you build any confidence in your trading, instead, attach your confidence to your execution.
If you can execute everything precisely and according to your rules. That’s a good trade. Whether it works out or not has nothing to do with you. Once your trading is based on your execution a certain magic will begin to occur… RESULTS. When you’re focused the execution the results will follow as a consequence.
You will find yourself in big trades because you’re actually involved in the market and not on the sidelines because you were scared that you were going to be wrong on this trade, yes, it happens to everybody. The key is to not let it stop you. So be patient because the confidence you are looking for comes with EXPERIENCE, TIME, and CONSISTENT EXECUTION.
Don’t bet the farm
Don’t lose your shirt
Cut the L
Keep the W