Forex Trading – Conquering Your Fear

When it comes to emotions of a trader, the one that can wipe off a trading account in a flash than anything else is fear.

Fear, in case of forex trading, means the outburst of negative emotion pursuant to anticipating an unfavorable outcome that we think will occur. Let’s talk about it in detail with regard to currency trading. What unfavorable outcome that we think might occur? Losing a part of your investment or whole of your trading account is the one that most traders think will happen. The chance of losing money is what experts refer to as risk. Risk is the most unlikable thing that comes in the way of trading. You just trade in spite of the fear (like me), because we think that the return i.e. profit outdoes the risk (the fear factor).

“Reward to risk ratio” is the phrase that you will often come across while currency trading. This is a measurable concept of how much money you can make in a particular trade; against how much you can probably lose in that very trade. We keep on trading despite the risks involved because we are in the quest of making profits. As in life, a currency trader always must consider the risk involved against the rewards expected.

What are the consequences of fear? How does fear affect forex trading? Following are some of the adverse effects of fear in currency trading.

1. Fear affects your normal trading. After you incurred some loses fear takes over. It plagues your judgment causing uncertainty. It makes you hesitant and you miss trades where you would have made good returns.

2. Fear makes you enter in a bad trade. The fear of not been able to make back the money you lost quickly forces you to enter in trade that is not favorable and even goes against your trading system.

3. Fear causes you to close favorable trades early. It is the fear of losing gains that you already made in a trade forces you to get out of it much early even though you know that you could have made more money staying in a bit longer.

4. Fear doesn’t allow you to move out of a losing trade. In spite of your trading strategy and market conditions indicating that you should get out of a trade now, you simply can’t because of the fear of losing money. You just hope that some magic will happen, and you will turn out on the winning side.

So, now the question is – “How you can conquer your fear? The answer is quite simple but not all easy to follow and that is you need to strictly put into practice a proven forex trading strategy, apply the principles of money management, understand and identify risk parameters and accept the fact that you will have some losing trades.

Your only aim in forex trading should be to make more money than you lose. It can only be achieved if you conquer your fear and trade with discipline.


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