Of all the emotions that can cloud traders’ decisions, fear and greed have to be the two most common. Fear can be a very useful tool in the face of danger, but it can also stand in the way of your profit if you don’t face it head on. Here are our tips for overcoming feelings of anxiety or fear when it comes to trading on the foreign exchange market.
Develop (and stick to) your trading plan.
We can’t stress this first point enough! A well-developed trading plan
outlines your entry and exit points, your risk to reward ratio and your objectives. These will help you to look at your trades rationally (and give you a clear path to return to if you start to make decisions that are based on emotion).
Face the feeling.
Why are you feeling anxious or uncertain? Is it because you’re new to the game, because you’ve recently had a couple of losses or because you’re making a decision that doesn’t fit your trading plan? Try to assess whether the fear is rational or irrational and you’ll be better equipped to respond appropriately.
Rely on indicators rather than instinct.
It’s easy to want to follow your gut and close out a trade to minimise a loss, but all too often that price could turn around and climb soon after. If you find that you’re consistently taking smaller profits than you should be, then it may be time to go back to your indicators and technical analysis
Don't compare your trading to others.
Comparison is the thief of joy – and of confidence too. If you hear someone bragging about their choices, remember that trading is a highly individual activity and what’s right for them may not be right for you. Instead, focus on listening to just a handful of trading mentors whose advice you trust.
Step away from the screen.
Watching prices too closely can have traders on the edge of their seat and closing out opportunities too soon. Try stepping away from the screen and setting certain times to look back at how the figures are faring. This should give you a fresh and more logical approach each time.
Remember that you can lose individual trades and still be profitable in the long term.
Even experienced traders lose on trades, and you should never take a loss personally if you’re working to a well-researched trading plan. Learn from the situation and concentrate on your goals. If you can learn to roll with the punches, you’ll be a confident and rational trader just like the best of them.
Risk Warning: Investing in Margin FX products carries a high degree of risk and is not suitable for all investors.