Every trader that wants to be successful at Forex must first learn how to overcome Fear and Greed in trading.
Trading Forex is fun and it comes with a violent emotional rush and it matters not if you are making or loosing your hard earned money because of a good or bad trade entry.
It is natural for our emotions to either rise or fall, when it is our money that is at stake.
That violent emotional rush will always be there.
When you are making profits, the emotions can be tolerated but to an extent. Because if left unchecked, the consequences can bring great financial pain.
When allowed to linger more than it should this excitement can lead to greed and this in turn, can lead to losses.
For you will be tempted to enter more trades, instead of taking your profits.
On the other side of this coin is another terrible emotion that I believe can really ruin your Forex career even before you start.
It is called Fear!
Fear will make your trading experience a nightmare. Every time you enter a trade, your blood pressure rises and you see yourself make all kind of mistakes because of the fear of loosing only to be loose big at the end.
On this post we shall be discussing few buy effective tips on how to overcome fear and greed in trading Forex.
How To Overcome Fear And Greed In Trading
1. Forex Trading And Greed
It is essential to learn how to overcome fear and greed in trading until you put a leash o. These emotions your Forex journey will remain a turbulent one.
Truth be told, greed is the reason why many people ventured into Forex. They heard about the success stories. And after watching many YouTube videos of traders making thousands in minutes, many if these inexperienced traders start looking for how to create a Forex demo account.
Even before they are properly taught how to trade, these newbies start placing live trades because of the greed to also start making thousands in minutes.
Then they blow their accounts again and again. Writing their names on that page of initial loss that all Forex traders make.
They go on to become better at trading but the greed remains within their heart, fiercer than before.
The reason why they can never become successful at Forex.
1. Be Patient With Your Forex Journey
The first way to control greed is to be patient with yourself while growing your Forex account
Do not try to become rich overnight.
Understand that Forex Trading is a marathon and not a sprint. It is not a race to be finished in a day.
So why be in a hurry?
This is the first foundation stone and upon it, a trader must build his other Forex Trading tips and strategies.
When a trader is patient with himself, he gradually begins to see the need for proper risk management.
He naturally begins to understand that he wins by not loosing. And tries by every means possible to limit losses.
Patient is the first key to the City of Gold and every trader must get theirs or risk loosing every penny they throw into the Forex Market.
With patience, the trader understands that the walk to the City of Gold is a long one. A journey that is won by every mile conquered.
He goes into the market to partake in this long walk, unlike those who come to trade Forex so that they can become rich overnight
With patience, he accepts the truth that it is okay to make small gains but on a consistent basis. Which would eventually add up.
Rather than try to make thousands in minutes like a fool who has refused common sense a space in his life.
To win at Forex, you must come with humble expectations. You must understand that the little wins do add up.
Do not try to Get Rich Overnight!
It takes time.
2. Use Small Lot Sizes
Because they want to make thousands in minutes, they start placing trades with big lot sizes and almost immediately start making huge losses instead of their imagined profits.
Huge lot sizes would get you huge gains when the trade favours you but would also amount to colossal losses should the trade go against you.
In most cases, it can blow up your Forex account with a single trade. Big lot sizes is one of the ways through which Forex traders loose their money and this is entirely caused by greed.
Thus one of the ways to control greed when trading is to start trading with small lot sizes. When trades go against you, the incurred losses would be greatly minimized.
That way you can either suffer small losses if you decide to cancel the loosing trade or hold unto the trade for days or weeks until the trades start getting profitable.
3. Do Not Over Trade
The third tip on how to control greed when trading is simple to not over trade.
Greed is responsible for over trading. A trader enters the market and wants to make all the trade entries so as to make all the profit the market has to offer for the day.
In another scenario the trader is loosing, one trade after the other. And instead of removing himself from the market until a more favorable time. He perpetuates the loosing spree by making more entries.
He doubles down on each new entry and thus every new loss incurred is greater than the last.
Do not be like that trader. Set daily limits for yourself. When you see yourself going through a loosing streak, learn to exit the market.
Do not enter trades upon trades. The more trades you make. The closer you get to making costly mistakes. It is mentally stressful. The mental fatigue will eventually undo past successes.
Conclusively the third tip on how to control greed when trading is to set daily limits.
Make a certain amount of profit and you exit the market. Make a certain amount of loss for the day and you also get to exit the market.
In other words, allow yourself just few trade entries for each day. Never go beyond that number, no matter what.
4. Take Your Profits On Time
If you are an experienced trader you already know that a profit can run into a loss.
Sometimes too fast!
And the kind of traders who are most affected by this kind of sudden market changes are the greedy ones.
They have a trade with some good pips already and instead of taking their profits or using a trailing loss to contain their wins, they set a take profit target so far away that their profits turn into losses eventually.
Do not trade like them. Take your profits on time by using a good trailing stop system that you have tested and which works for you.
Agway take your profits on time.
2. Forex Trading And Fear
This is the part where we talk about fear and Forex trading. And how we can control an emotion so powerful that it can force a trader to exit a very good trade.
People don’t come into the Forex market with fear. They come with greed and fear is what stares back at them when price actions takes on its unpredictable nature.
The thing with fear and the Forex market is that when it gets a grip of you, it becomes hard to completely disengage yourself from its cold embrace.
The first loss comes as a rude shock. And then the reality is revealed that even though the trend is your friend, the market is not.
Each new loss reinforces the fear of loosing. And you begin to trade with fear, more than you should.
If you enter the Forex market with fear of loosing, you have already failed. Because loosing is also part of the Forex journey and it is okay.
It is okay to loose some.
It becomes an issue when all you do is loose or when your losses are more than your wins. That is when it becomes an issue.
The fear of loosing will hinder your growth. You will see good trade setups and still be afraid to take the trade despite the fact that price actions and your Algo is saying the same thing.
The fear of loosing would see you exit trades even before they begin to move. You will be an emotional wreck.
Now let us talk about how we can control this fear.
1. Trade With Big Forex Account
The first tip on how to control fear when trading Forex begins even before you enter the Forex market
It happens when you are funding your Forex account. Make sure you fund it well. Because a huge Forex account is a solid remedy against the fear of loosing when trading.
Just imagine a trader that has a live account with $10,000 in it. He uses proper risk management that permits him to only place 2 trades a day with just 0.10 lot sizes.
Now let us imagine the trades going against him. A loss it is, but so small and insignificant that the trader is not worried about the bad trade.
He is ready to allow the bad trades stay open in the market for weeks, until they correct themselves by going in his expected direction.
This is made possible because he has a Forex account that is big enough to withstand whatever the loss that is incurred overtime.
When a trader is in charge of a big account, the idea of blowing his account is completely erased.
The fear of loosing is greatly reduced just because his account is huge!
It is a very effective tip. One that works all the time.
In order to reduce the fear of loosing by at least 80%, a trader must begin his trading journey with a very big account that is of course operated by the principles of proper risk management.
2. Use Proper Risk Management
A huge Forex account is nothing without proper risk management. An inexperienced and greedy trader can blow up a $10,000 account with just a single trade by using a crazy lot size.
I kid you not when I tell you that Risk Management is the magic that would make your dreams come through in the world of digital currencies.
Risk management would keep you alive. It will protect your Forex account from self termination.
No trader survives the Forex market without proper risk management as part of his arsenal.
It is impossible.
When a trader goes into the market with the right lot size, preferably just 2% of his account. He goes into the market prepared!
He places his stop loss using the right ATR calculation and to further manage his risk, he only places his trade following the trend. While avoiding choppy markets.
Such a trader by employing risk management is trying to stack the odds in his favour.
When a trader places a trade using risk management as his assurance, he is bound to eventually succeed at making profits from Forex.
So start with a huge capital that is operated with proper risk management as the standard and the fear of loosing would become an inconsequential matter.
3. Automate Your Trades
Fear is your emotions in chaos. We fear what we do not understand. We fear what we do not like. To overcome fear, one must learn to deal with the emotions inside.
And when it comes to Forex one of the best ways to remove emotions from trading is to automate your trades.
By using an automated system, you don’t have to look at your charts minutes through minutes.
You allow your expert advisor (ea) to do the work. The EA in most cases would enter and exit trades on your behalf, it would be run on autopilot from start to finish.
Personally I don’t like this kinds of EA. The EA I use is a Trade Manager. I enter trades manually and the EA takes it from there.
Placing stop loss, trailing stop, break even and take profits targets automatically. All I have to do is enter the trade and the trade manager does the rest for me.
I don’t have to be in front of the charts. That way I am able to survive the market noise and false signals that would ordinarily force me to make bad decisions.
The whole idea is to reduce your emotional involvement in your trades. Which gives you peace of mind and freedom.
Most importantly it takes fear away from your trading.
4. Trade Only Tested Strategies
Another way to control fear when trading is to only trade tested Forex strategies.
When you trade strategies that you have already tested, you get to trade with confidence.
Fear have no place in your psychology because you trust your strategy. And this is because you have tested that strategy.
You already know the win rate of that strategy before using it. And so you know what to expect.
5. Accept Losses To Be Part Of Trading
Another tip to take home is that you must accept the fact that losses is part of trading Forex.
This is why as traders using stop loss is encouraged. When we decide to use stop loss we are actually accepting that fact.
When you trade the Forex market with this mindset, it takes away fear from the picture.
You place your trade and right from the beginning, you are okay with a certain loss.
You enter a trade and you place a stop loss of $10 and then set your take profit. After which you go about your other businesses for the day.
What that means is that you are okay to loose $10 and nothing more. You know this from the beginning and you are okay with it.
In this case the stop loss enables you to accept a $10 dollar loss even before it happens. And because you have accepted it, you automatically remove fear.
This is another very important tip on how to overcome fear and greed in trading Forex.
A tip that says its okay to win some and loose some but as long as there is another day to trade, then it is okay.
Hope this post on how to overcome fear and greed in trading was helpful? Do not forget to share.
If you are new to Forex then learning how to trade with moving averages will do you alot of good.
Photo Credit: Cambridge Partner’s