Taking on Forex trading is, like any endeavor, a journey that has its own set of victories and defeats. For you to become a successful trader, besides diligently educating yourself, planning, and executing your strategies, the ability to remain coolheaded and not get tangled up in emotions is as crucial as the rest. This is especially true when you flunk a trade and lose money. The ability to manage and avoid out of control emotions is not something you should force upon yourself, but something that emerges out of the knowledge of why they are an obstacle to your success in the first place. Here we will present to you 5 new mindsets that will help you stay coolheaded when your trades go wrong.
- Losses Are Inevitable
It is impossible to peruse Forex trading and not find yourself losing trades. That’s just the way things are. The element of unpredictability is embedded within the nature of the craft, and there is no way around it. What you must focus on is how smartly are you trading. Are you stacking the odds in your favor? Even if you’re doing everything right, remember that you can’t expect certain success out of any trade. Free yourself from negative emotions by fully internalizing this fact.
Adjust Your Trading Identity
So you think trading is pretty cool, eh? It is! The thing is, if you see yourself too strongly as a “trader” and your sense of worthiness is attached to it, you might not act completely rational in trades. You become emotionally invested in the outcome of the trades, and this behavior could take you down the dangerous path of overtrading or treating trading like gambling. You can tackle this situation in two ways.
- Loosen up your sense of identity. Trading is something you do, not something you are. This way, you will gain some distance from your trades and will be more objective and, therefore, more coolheaded, increasing your chances of success through correct, non-emotional execution.
- Keep your identity as a trader! It But then, adjust what it means to be a trader in the first place. Great traders put in their time to study and execute their plans and are patient, rational, objective, coolheaded, and so on. You can leave your wild side for after your trades.
- You Should Only Be Trading Risk Capital
Maybe you’re losing your cool not because your sense of identity is invested in your trades, but because you’re trading money you shouldn’t be trading. Forex is unpredictable and risky in nature; you should only be trading risk capital, not your mortgage or kid’s education fund. The money you are putting into trading shouldn’t affect the quality of your lifestyle if you were to lose it. So, how do you know if the money you are using is risk capital? Well …
- Embrace the Process—Let Go of the Outcome
Realize that Forex trading is a continuous process of learning. Most of the times, in Forex trading (and in life!), you learn more from your mistakes than from your victories. Losing money in Forex should motivate you to look closer at your actions, read more, better educate yourself, become more disciplined in your execution and so on. Next time, you will have a better idea of what happened and where you went wrong and can open up room for improvement and start stacking the odds in your favor. Enjoy the losses as much as you enjoy the victories. As counterintuitive as is sounds, putting your focus out of making money and into enjoying the process will keep you on the right track and more likely end up in profit.
Although this point may be a little redundant (since most of the points we have here are reframes), it is a good idea to have a solid understanding of what this idea means. When you reframe a situation, you dissolve the automatic or unconscious meaning you give to it and consciously assign a new more constructive one. For example, you lost a trade. The automatic meaning you might come up with might be, “I’m not doing this right,” “I suck at this,” “I’m throwing away my money here!” Instead, you could reframe it in a positive way “Losing this money is like paying for my own experience or education” or “This loss is an opportunity to look closer into what I’m doing.” Notice how a reframe has nothing to do with tricking yourself into believing a reality that is not true just for positivity’s sake. Rather, it is an override of negative conditioning that leads to a negative assessment of the situation.