In a number of my blog posts I have suggested to keep emotion out of your forex trading. However, I would dare say that it is impossible to trade without emotion. Then again, I also believe that by using good money management practices one can lessen the negative affects that the natural human emotions can play in decision making in a trade.
I recently had an acquaintance contact me, and she was in panic! She had lost a lot of money and needed help. She explained it like this. “Every time I look at the charts I get the shivers. I can’t think straight.†You could almost hear the agony in the email when she wrote, “Help me! What do I do?â€
I advised her to take a few days off from trading get completely away from it let her mind clear and do something different. She needed a break to get her head on straight. I told her however that she could contact me anytime to discuss her frustrations. She did take some time off and after a few days was feeling better. She went back to the trading again and started to feel the “shivers†again. The old fear was back. She decided to wait a bit more.
After a few more days she came back to it and even though she was nervous and a little apprehensive she was able to make a few small practice trades at first and then start trading live again with small amounts to lessen her emotional stress. She continued to practice and trade a small number of lots per trade until she felt better about her self and had gained back her confidence. Fear is the one thing that will either cause you to make poor decisions or leave the market all together. So, if you find yourself in a panic the first thing you need to do is NOT trade! Take some time to re-group. Set a plan and start up small, this will give you a better chance of recovery from the fear.
Another way to eliminate fear or keep it in check is to never over leverage your account. This is another trader killer that claims way to many traders and investors. This is governed by greed, another triggered emotional response to the market that needs to be avoided and guarded against constantly.
I had a close friend of mine trade a small amount of money without leveraging it safely because he “got lucky†a few times and thought he could handle it. He gave up and never went back to it and is stuck at his dead end job. I can’t think of a worse fate than letting opportunity pass you by because you let an emotion get in the way.
We have all let, and will continue to let emotion govern how we trade and conduct ourselves in the market. The key is to have a trading plan and a study plan and to follow those plans.