How to defeat the fear in Forex trading?
Fear is a natural emotion that people face a lot throughout their life. And since Forex is still quite a risky business, many traders, both beginners and experienced ones, have to deal with their fears in trading.
Can you eliminate this emotion and turn into an absolutely fearless trader? Hardly. But there is definitely a way to minimize the fear and also become more resistant to it. Fear itself is not as bad as the impact that it has on traders: fear paralyzes some of them, cripples their sharp minds and affects the decisions. But once you manage to control your fears, you get to the new level of the market opportunities.
There are several trading fears everyone will most likely experience during their trading. Let’s see what can be done about the two most common fears of the beginners.
The fear of loss
No one likes losing. That’s a solid fact. Moreover, no one likes losing money. But unfortunately, losses are part of the Forex world, and if we can’t completely prevent the thing, we can change our approach to it.
Being careful is important, but trying to avoid any risky situation because of the fear means losing countless opportunities for a win. Fear is, believe it or not, a part of the whole trader/s path, alongside with taking risks and thinking clear when making a difficult decision. So, what can be done?
1. Do not risk what you can’t afford
It is pretty logical, right? Lower your lot size to the level that is comfortable enough for you to trade. It doesn't mean you need to trade same $10 all over again – just no need to raise the stakes till the amount that makes you lose your sleep at night.
2. Do not open too many orders at once
Especially when you are in the beginning of your market journey. The more orders you have open, the harder it is to keep an eye on all of them. Therefore, the anxiety rises. Smaller number of positions help you focus on them more. Check out the video explaining the position size and basic risk management to build a confidence! And in case you want to grow even deeper roots in risk management to be sure you’re protecting your funds the best way possible, read about controlled trading in our Forex Guidebook.
3. Define the trading plan and follow it. Train yourself to trade one of the classic Forex indicators
The trading plan is another essential step. It should be clear; it should be suitable for you; it should be followed stickily. That’s pretty much all you need. If you have a very clear and defined idea of when to enter the trade and exit it, it is much easier to overcome the fear of a mistake.
4. Get yourself a trading journal and analyze it
Make sure you keep a record of your transactions in a trading journal. The purpose of a trading journal is to build confidence in your trading system. When you trade with confidence you are able to trade objectively. Whenever you see your notes about the trade setup, enter and exit, your emotions, you can analyze the strategy and your own state of mind. Besides, it helps you to manage your emotions and actions taken on the market.
The fear of live account
This fear logically comes out of the previous one: whenever a beginner trader starts to think of changing from demo to a real account, this though brings chills down the spine and a sticky fear of “what if I fail”. Demo account is a very good practice and a way to get in tough with the market and the system, let’s face it – it’s not the same as trading real money.
The possibility of risking money is stressful, so you should learn how to handle your emotions and how to overcome your fears to maintain control of your trading decisions. Here are some hints:
1. Open the cent account
Yes, cent account won’t bring you millions overnight, but it will certainly help you feel responsible for your money – and test your hand. Try start with $50 rather than $1,000 straight away, if you feel anxious. It’s not the amount of the fund that matters, it’s the result, so if you can’t trade consistently with $50, you won't be able to do it with $5,000. So, if fear is settling in, make a few changes and see if that will help you out. Lower risks will help you clear up the strategy and withdrawing profit – even a small one – will lift the spirits.
2. Just simply DO IT
Forex is about overcoming your fears, as simply as it is, and sometimes it requires bold decisions. The one who’s never mistaken is the one who never did anything – so give yourself some credit. The market can be quite an unexplored area for you yet, but it only means you have so much more to discover ahead of you! Start with smaller sums, don’t rush into it, but ascent step by step to the master trader.
Becoming your own hero
Even small victories are still victories, and small changes lead up to big results. The first step in getting over your fear is rationalizing it: decide on your trading strategy, the one that suits your personality, lifestyle, timetable and other valuable factors. Follow your strategy and keep a track of your moves to make sure you always can come back and learn from your success and mistake rather than be afraid of both. Remember why you started trading – and take a leap of faith!
Face your fear and turn it into an opportunity. Sounds fair, right?
