We all know the feeling of fear. It could be the fear of losing money, not making back that money, making the wrong choices while trading or even missing trading opportunities. Our adrenal glands produce the hormone ‘adrenaline’, increasing our heartbeat and breathing, which in turn prepares us to overcome the potentially dangerous situation that we could be in. In the Forex market, fear can be your worst enemy or your best friend.
“The feeling of fear is induced by a perceived danger which causes a change in metabolic and organ functions and also behaviour. The response of fear is the perception of danger which leads to confronting it or hiding and avoiding the threat, which is known as the fight-or-flight response. Fear can also cause, in extreme cases, a complete freeze or paralysis response which is also known as horror and terror.” – Fear From Wikipedia, the free encyclopedia
Although it can be, fear is not always your best friend in the Forex trading market. Successful traders keep fear at by being in control of their emotions. Others can be controlled by fear and they might not even realise it, which causes anxiety and hesitancy that could ruin their trading potential. Executing, holding and exiting trades can become a stressful situation. Successful traders take advantage of the adrenaline rush that comes with this situation, using the increased concentration and awareness to take control of the situation. In an inexperienced trader’s case, they allow the adrenalin rush to get the better of them which leads them to make stupid mistakes caused by impaired judgement.
Fear in the Forex Market
As mentioned before, the following points can cause fear:
- Fear of losing money
- Fear of making the wrong choices
- Fear of missing trading opportunities
Fear of Losing Money
A successful trader considers trading as a business and just like any business, losses are a part of it. The biggest culprit of fear in the markets is, yes you guessed right, the fear of losing. Losses make us feel like failures, leaving our egos bruised, because let’s face it no one likes to be wrong. It is in our humanly nature to feel this way. Accepting that there will be losses in trading and learning from your losses will only be better in the long run for your trading career. Something to keep in mind: “The most successful and largest hedge funds sometimes have quarterly losses.” If the best financial minds in the world have losses, should you really fear losses?
With a clear strategy for you to follow and sticking to the rule will, over the course of time, result in success. Consistency is key to success in the Forex market, and without solid rules for every situation, you cannot be consistent.
Fear of Making the Wrong Choices
The fear of making the wrong choices corresponds closely with the fear of losing. A wrong trading decision doesn’t always lead to a loss. It can lead to profits, and at that point you won’t be upset with yourself that you made the wrong decision at first. Every trader should have a trading plan set out for themselves, this cannot be stressed enough! A trading plan refers to physical as well as an emotional plan. By making the wrong trading choices gives you the opportunity to learn and grow from these mistakes. Every person in this world makes mistakes and no one is perfect. Do not base your success on winning trades only, but rather on the learning process and move your trading career in the right direction. Even when you do things according to plan, you will still have losing trades but accept that and learn to see the positive from it. Don’t fear making the wrong decision as you will never get rid of them completely. Always remember that success as a trader is just as much mental than anything else.
Fear of Missing Trading Opportunities
Missing a trading opportunity can, for most traders, be as bad as or even worse than losing a trade. This refers to the lack of patience and discipline which can be extremely dangerous and can contribute to the fear of loss. Fear kicks in with the thought of missing out on a trade, which leads to rushed and impaired trading decision. What traders fail to see, is that this leads to bigger losses as an end result. So like mentioned before, you need a trading strategy that you feel comfortable with. So find a strategy that you believe in and works for you, this will then help reduce your fear while trading and develop a trading plan that you will stick to. If you follow these two key tips, it will benefit you when it comes to handling your fear of missing trading opportunities.
Don’t Let Fear Control Your Trading
Emotions like fear can make or break a trader. Knowing how you, as a Forex trader, can deal with these emotions makes a world of difference. A successful trader never makes the same mistakes over and over again. Why? Because they learn from their mistakes and make the necessary changes to their strategy. Believe in yourself and stop letting fear control your trading decisions. Fear will always be present but it does not have to be a bad thing when you are in control. So set up that solid trade plan and begin controlling your fear.
“A positive attitude gives you power over your circumstances instead of your circumstances having power over you.” – Joyce Meyer