Many new traders think that profiting from the Forex involves finding a 'secret formula' or trading strategy. So they embark on an exhaustive search for what amounts to the 'holy grail' only to find themselves still searching 2 or 3 years later still waiting for consistent profits.
If that is the case, it is unlikely to be the strategy that's the problem. Profiting from Forex can be done through any number of tried and test strategies. Just purchase a training package from many of the reputable online traders or brokers and you will find them.
The main problem that stops traders from profiting from Forex is in the mind! Successful Forex trading involves a whole range of mind control skills and mental disciplines that take some time to develop.
So if you are still struggling after one or two years of trading the Forex, start to focus your time and energies not so much on searching for a new strategy or trading methodology, but rather on yourself and how you approach and manage trades.
Monitoring Emotional State
How can this be done?
By monitoring our personal responses and emotional state during the course of a trading day.
Once we have a strategy we have confidence in, it is merely a case of waiting until the setup appears where we can employ that strategy.
Here is the problem. The Forex market goes through long periods of consolidation and low liquidity. The anxious trader will desperately look for trading opportunities and deviate from the strategy they have selected.
So things may not be quite right, but it looks reasonably favorable so in they go only to be dismayed when the trade turns against them.
It takes much mental discipline to restrain oneself from going into trades that do not match the criteria the strategy demands.
Once in the trade, mental discipline is again required so the trade is managed properly.
Have you ever found yourself doing this?
You enter the trade after examining risk and profit potential. Your stop is strategically placed 25 pips from your entry point. Price starts to go against you. It gets dangerously close to your stop and you think to yourself, "the trade needs a little more room for maneuver so I'll push back the stop by another 5 pips." Price continues to pull back getting close to your new stop.
The novice trader now thinks, "Just another 5 pips to make sure I'm not needlessly going to get stopped out of this trade" and moves the stop back to 35 pips.
Almost predictably in this scenario, price continues stopping out the trade at 35 pips. The trader has now suffered a loss of 35 pips instead of 25 pips which was originally factored in.
Continuing to trade in this manner makes profiting from Forex pretty remote! It takes mental discipline to stick to the plan!
Winning And Losing Responses
Then come the emotions associated with winning or losing.
The newer Forex trader will feel emotions of elation on getting a winning trade. In fact, the whole day can appear bright and cheerful with just one winning trade.
On the other hand, a losing trade can put the same trader into the depths of depression or despair. The day seems grim and hopeless leading to flawed judgment on the next trade which also goes wrong and compounds the attack on the trader's level of confidence.
It takes mental discipline to keep the emotions in check trying to avoid feeling either elation or despair on the basis of a winning or losing trade.
The disciplined trader approaches order entry almost mechanically realizing there will be winners and losers and that the strategy, if adhered to, will in the end win out!
So how can we develop this tough mental condition and strong mindset if ever we are to see the day when we are actually profiting from Forex?
Just as the trader will keep monitoring the charts, watching price action and candle formations during the course of a trading session, the same monitoring activity needs to be applied to the mental and emotional condition.
Self-Monitoring Sessions
This can be achieved by constantly asking questions of oneself. For example:
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What am I feeling right now?
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Am I in a relaxed state or am I anxious, agitated, or frustrated?
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Am I desperately looking for trading opportunities when no high probability trades are setting up right now?
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How did I react after my last trade whether it was successful or not?
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What can I learn from that and how can I better handle my emotions next time?
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Am I enjoying the experience or am I nervous of the markets?
Many sports participants and Olympic medalists spend huge amounts of time and resources on getting the right mindset. Coaches work with them to develop mental discipline and mind conditioning so they perform well under pressure and become aware of their own emotional state and feelings.
Often, it is not so much the level of skill or physical strength that makes the difference between the winner and the rest, it is competitor who has mental toughness who has the edge!
Focus On Mindset
So if you have been trading the Forex for one or two years already with mixed results, why not focus on your mindset.
Select a strategy that has a tried and tested track record by other traders and professionals who are already profiting from Forex, and then spend most of your time and energy developing the mind skills necessary to get into the small percentage of traders who actually make money on the Forex!
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