How does fear affect your trading?

Fear Affects your Forex Trading since you can’t profit with no market objectivity.

Fear is an emotional feeling that comes up as a result of failure, rejection or pain.

If not controlled, fear can lead into depression, stress or failure.

common fears in forex market

Most times fear comes as a result of greed after experiencing a big draw down on your trading account.

It can cause panic which leads to wrong decisions.

Let’s have a look at this scenario;

Imagine you have  a buy position on USD/CAD. 

One of your trading partner comes shouting how the U.S. Crude Oil Inventories is at peak more than ever.

Of course this favors the CAD, (Less than expected).  Your eyes wide open, immediately you imagine how much money you have lost.

If you had a stop loss, it’s hit already and if you had no stop loss, then your account must be blown.

That’s fear!

Being scared is normal but when you let it take control of you, you will only focus on how much you have lost and then live in regret.

Such regrets and pain are some of the reasons people give up on trading prematurely.

How fear Affects your forex trading

We shall discuss Common fears traders Experience.

We also learn how fear affects your forex trading briefly and see how to deal with it.

1. Fear to lose on a trade.

The fear of losing a trade can make you miss on potential great opportunities.

It causes procrastination within you. You find yourself undecided whether you should enter a position or not.

By the time you feel confident enough to take the trade, it’s already hitting your anticipated profit target.

This is kind of behavior is common especially in new Forex traders.  It is likely to happen after you have suffered a large draw down than your emotions can handle.

Similarly, you sometimes enter a trade, when it has moved a few pips against you, you panic and close it prematurely.

This because you are scared of making a large loss again.

When this continues can lead to loss of confidence in yourself and you may even start doubting your strategy.

Experiencing losses is normal in Forex trading.  In probability you have to always expect a win or a loss. When you worry so much about the results you may never take any trade at all.

If you are planning to perform in Forex, you have to learn to accept losses as part of trading and stick to your trading plan.

Revise your trading journal always and learn from your previous mistakes.

Manage your risk properly so that you don’t get large draw downs that breed fear!

2. Fear of missing out trades.

Forex market offers as many opportunities as possible and you can trade at any time without any kind of limitation.

But this doesn’t mean that you have to trade all the setups in the market.

Apart from fearing to enter new trades, some traders want to trade every setup that surfaces in the market and so they fear on missing out.

This can also be some sort of greed. You are always in the market trading all the time.

When you see the market rallying up, you just jump in because you don’t want to miss out on that. If it rallies back down you also follow.

That’s not even close to gambling.

You are just trading with no plan, always standing by ready to jump in in case of anything at any time.

At the end of the day you will realize that all the trades taken were at a wrong time and the market was always going against you.

This is because you are trading with no discipline at all.

3. Fear of not being right.

In trading Forex,  you don’t need to be that Ms/Mr. Perfect. No one is going to blame you whether you are right or wrong.

It is only you and the market.

What if I tell you no one can tell the market what to do, where to go.

So you don’t have to be right all the time to make money!

To be a successful trader, it does not require you to be right all the time but to believe in yourself, your strategy and trading with discipline.

If you focus on being perfect all the time, you might not last long in the game.

If a trade fails you can’t force it to move according to how you want it.

Accept and learn how to cut your losses when still low and wait for another opportunity.

Cutting losses is better than waiting on a losing trade and then end up taking a large loss.

Or watch your account blow because of your ego.

You must learn to accept the market and not to take it as a mistake.

4. Fear of letting a profit turn into loss.

This is normally experienced by traders who are afraid to accept losses. They always want to lock in quick profits as a guarantee for their win trades.

By doing so, they don’t give enough space for a trade to breath and their trails are hit on a short notice.

So they miss out on the big part of profits and always take small profits.

This is so common in traders because they are scared of seeing a trade get in a negative when they have already seen a positive figure.

It is advisable to trail and lock in some profits but it should not be so tight or close the current price of your running trade otherwise you will be stopped out.

How do you know you are under possession of fear?

  • When you find it hard to enter a new trade because you are scared of losing.
  • When you always enter trades late because you are not always sure if you should take a trade or not even when it is giving a perfect setup of your trading strategy.
  • In case you always jump out of trade before it hits your take profit target and then the trade continues your direction overtaking your target profit level.
  • When you realize that you always panic to close your open positions when a trade moves a few pips against your favor.
  • If you find yourself chasing after a trade because you cannot afford to miss it.

It is clear fear affects your forex trading much more than you can imagine.

The best way to overcome fear is to believe in yourself and your trading system.

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