Forex Trading Articles

DON’T SET YOURSELF UP FOR FAILURE,
START OUT STRONG

Forexmentor Team
© 2007, Currex Investment Services Inc.

May 10, 2007

Trading is a challenging business. Not only is it tough to repeatedly find winning trade after winning trade, it is also hard to control your emotions. Our emotions often get the better of us. Our expectations tend to influence how we feel as we trade, and when we doubt our abilities, we may have difficulty maintaining a winning attitude. One good approach to staying optimistic as you battle with the markets is to build up psychological momentum; start off ahead of the game and build on that success. Many traders, however, set themselves up for failure. They start off making trading errors and dig themselves into an emotional hole that they have trouble climbing out of.

The expectations you have regarding a trade can dictate how you approach it. If you feel you are about to make a mistake, then you probably will. You might have a perfectly good idea for a trade, but you may feel so on edge that you have trouble taking advantage of it. It often starts out innocently enough. You have a good trading plan but you make a few little errors. Perhaps you trade under less than ideal market conditions or you set your stop too close to your exit point, and get stopped out. Maybe you don't put up enough capital to make your trading plan work. Whatever it is, you may make a few poor decisions, end up with a losing trade, and feel disappointed. Making one bad trade isn't a big deal, but what happens when you make another losing trade, and then another losing trade, and so on. At that point, you may feel that it is hard to get out of the minor slump you are in.

How can you set yourself up to win? First you need to realize that trading can be much like a self-fulfilling prophecy: you secretly believe that your trading plan won't produce a profit, and then you subtly self-sabotage your plan by feeling uptight, and constrained. It is vital to feel relaxed and carefree when you start out the trading day. Think optimistically. Second, why not cheat a little? When you start the trading day, wait for an ideal trade, a trade you can afford to make and has a high probability of winning. If the first thing you do is make a profitable trade, even a small one - you'll feel good on your first trade, and then you can start building on your solid start.

When you set yourself up to win, you feel good, and this good feeling can help you trade more creatively. Instead of feeling tense, you will trust your instincts and be more willing to risk capital. You won't make minor mistakes like risking too little capital or placing your protective stop too tight and getting repeatedly stopped out. If you trade with confidence, these minor errors can happen below your awareness, and at that point, you may start mounting losses. Why set yourself up for a series of losers? Start off strong. Set yourself up for success, and build up the psychological momentum you need to trade with a winning mental edge.

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