Forex Trading Psychology: Levels of FEAR

Forex Trading Psychology: Levels of FEAR

FOREX TRADING PSYCHOLOGY
  

People can always relate FEAR to forex trading.
The fear of losing money.
The fear of losing that trade which is too much for you to handle.
However what most people do not realise is that there are different levels of fear.
Eg.
When you can afford to lose that trade, (which you still do feel fear)
you are still able to think rationally and life goes on.
(ALTHOUGH YOU STILL DO NOT WANT TO LOSE THAT TRADE)
In the example above, fear is definitely in our emotions.
But because the level of fear is low, we are able to handle the fear and still think rationally.
HOWEVER,
Eg. your forex trading capital is $10k.
Your current open trade is now losing -$5000.
And that’s half of your capital.
Or worst to say, that’s half of your life asset. (Money you can’t afford to lose)
Forex Trading Psychology – Fear kicks in. (This time in higher dosage)
Then you start seeing your open trade grows to negative -$6000.
Your Fear level increases, you can feel your heart beat racing.
And sure enough, your worst fear arrived,
The trade increases to negative -$7000.
Forex Trading Psychology: Levels of FEAR

Your level of fear had reached its final peak level.
(you know it when you feel):
- Desperation
- Your face turn black
- You isolate yourself
- You start blaming people, things, events
- You pray
When you feel this level of highest fear.
You can’t think rationally any more.
You know that you can’t think rationally any more when:
- You have decided to increase lot size on your next trade
- OR You decided to go ALL IN on the next trade
You want to get revenge on the market.
You now feel HATE and ANGER.
Forex Trading Psychology: Levels of FEAR

And sure enough, when you start to do things irrationally.
That is the downfall of your trading career.
So you see, there are different levels of fear.
And the highest fear can lead to other emotions like ANGER & HATE.
When you start to do all the above.
You know you have reached your highest level of fear.
It is time to stop trading for a while.
Go get a rest, a shower, a walk.
When you feel that you have calm down and begin to accept things.
I want you to think of what went wrong. (not to blame others)
but what mistake did you made in the trade.
Good chance is that you are risking too much.
And i want you to WAIT and NOT trade until your feeling of hatred, anger and revenge is gone.
That is when you are able to think rationally and go back to fix the problem.
Remember, forex is a journey and not a one time success.
Most traders want to make big bucks in a few trade. But eventually lose it all.
Professional full time traders are ones who trade consistently and happy with reasonable profits.
Let me know if you had experience the above before and what you did, or what happen?

Ezekiel Chew

Fear is a part of forex trading. Usually after losing some trades traders become fearful. To overcome the fear we need good knowledge and skills of trading. When we know what we are doing, it becomes logical and fear disappear.

asiaforexmentor1 posted:
Forex Trading Psychology: Levels of FEAR

FOREX TRADING PSYCHOLOGY
  

People can always relate FEAR to forex trading.
The fear of losing money.
The fear of losing that trade which is too much for you to handle.
However what most people do not realise is that there are different levels of fear.
Eg.
When you can afford to lose that trade, (which you still do feel fear)
you are still able to think rationally and life goes on.
(ALTHOUGH YOU STILL DO NOT WANT TO LOSE THAT TRADE)
In the example above, fear is definitely in our emotions.
But because the level of fear is low, we are able to handle the fear and still think rationally.
HOWEVER,
Eg. your forex trading capital is $10k.
Your current open trade is now losing -$5000.
And that’s half of your capital.
Or worst to say, that’s half of your life asset. (Money you can’t afford to lose)
Forex Trading Psychology – Fear kicks in. (This time in higher dosage)
Then you start seeing your open trade grows to negative -$6000.
Your Fear level increases, you can feel your heart beat racing.
And sure enough, your worst fear arrived,
The trade increases to negative -$7000.
Forex Trading Psychology: Levels of FEAR

Your level of fear had reached its final peak level.
(you know it when you feel):
- Desperation
- Your face turn black
- You isolate yourself
- You start blaming people, things, events
- You pray
When you feel this level of highest fear.
You can’t think rationally any more.
You know that you can’t think rationally any more when:
- You have decided to increase lot size on your next trade
- OR You decided to go ALL IN on the next trade
You want to get revenge on the market.
You now feel HATE and ANGER.
Forex Trading Psychology: Levels of FEAR

And sure enough, when you start to do things irrationally.
That is the downfall of your trading career.
So you see, there are different levels of fear.
And the highest fear can lead to other emotions like ANGER & HATE.
When you start to do all the above.
You know you have reached your highest level of fear.
It is time to stop trading for a while.
Go get a rest, a shower, a walk.
When you feel that you have calm down and begin to accept things.
I want you to think of what went wrong. (not to blame others)
but what mistake did you made in the trade.
Good chance is that you are risking too much.
And i want you to WAIT and NOT trade until your feeling of hatred, anger and revenge is gone.
That is when you are able to think rationally and go back to fix the problem.
Remember, forex is a journey and not a one time success.
Most traders want to make big bucks in a few trade. But eventually lose it all.
Professional full time traders are ones who trade consistently and happy with reasonable profits.
Let me know if you had experience the above before and what you did, or what happen?

Ezekiel Chew

Very nicely explained.

Trading psychology is the most important thing after trading strategy. Even a good strategy can be invalid if we are not psychologically well equipped. Every trader should focus on this aspects.

Meditation is very important for human psychology. It is possible to take the help of meditation to overcome fear.

When your real money is involved, the fear of trading is quite natural. But you must not let fear come in your way of making your trading decisions. You can add activities like Yoga and Meditation to your daily routine to be able to control your emotions.

Fear doesn't let us think properly. We become restless because of fear of losing and fear of losing out any trade.

You are absolutely right. When money management is not followed, fear is going to take over. Usually, we are supposed to take 1%-2% risk in a single trade. There are two more things that we need to maintain are winning ratio and risk-reward ratio. If we trade with proper money management, risk-reward at least 1:1 and winning ratio 60%+, then we surely be able to make money by Forex trading.

UweMoench posted:
Fear is a part of forex trading. Usually after losing some trades traders become fearful. To overcome the fear we need good knowledge and skills of trading. When we know what we are doing, it becomes logical and fear disappear.

You have to remove fear to make a good trading career in this market.

When your money is involved, it is obvious for you to be afraid of the losses. This is what you need to work on as a beginner. Prepare your mind for the losses so that you can have a smooth trading career.

For me removal of fear came from repitition and building up a large set of data based around my trading plan so that I could see that it should work if I stay the course. Once you can see that and be at peace with it, the individual losses just become part of the process in the same way I have days when my index fund is down for the day. It doesn't matter as I'm looking years down the line.

You can never trade out of fear. You have to manage this psychology and try to make a profit. Motivation has to be used a lot. And you have to meditate.

Psychology is very important. Psychology needs to be controlled by every trader. Without which successful trading can never be done.

No matter what, a trader needs to learn to control their emotions. If a trader is not good enough at controlling their emotions, they can have a tough time trading. Only a knowledgeable and skilled trader would be able to make money in the forex market.

Whether a trader trades using a thousand strategies, he must first manage psychology. The main reason for failure is weak psychology. So every trader should try to trade by controlling their emotions.

Fear and greed are harmful emotions in trading. The place where many traders are interrupted. If the trader is experienced in this place and is able to control emotions, there will be no obstacle for him to succeed.

LukeRachel posted:
Fear and greed are harmful emotions in trading. The place where many traders are interrupted. If the trader is experienced in this place and is able to control emotions, there will be no obstacle for him to succeed.

Exactly, first of all, you have to control your emotions and participate in trading. If you trade out of greed and fear, the investment can be zero every time. Therefore, you have to manage the risk, eliminate the fear, and trade positively.

Steve Ward ----High Performance Trading Book
Its a very good start.

Read The Psychology of Money, great book on the subject.