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Forex Trading Nightmare – Taking Care of Trading Psychology

We’re all human and we can all be influenced by greed and fear in our forex trading no matter how experienced we are.

Just last week I was watching a training webinar as part of my continuing education for my Chartered Accountants qualification and there was some discussion about the impending US fiscal cliff.  The way they were talking you’d think it was the end of the world as we know it.  Since I’m a technical trader I try to avoid the financial news so I was subjected to more doom and gloom market talk than I’m used to hearing.

I didn’t think much of it at the time and tried to ignore it as best I could while listening to the webinar just enough to ensure I could honestly have said I’d completed my full 2 hours training.

I thought I’d got through it alright and as I went to bed that night I checked the situation of my open positions to see where they were at.  On that particular day, it would have been nice if they were in better shape.  It didn’t worry me in the slightest because my equity curve is great and I don’t win on every trade and don’t need to.  If these trades were stopped out it was fine by me as I know I’m trading with an edge.  Still, with that said I much prefer winning trades and would have liked to have seen the trades doing better and they had been earlier in the day.

Off to bed I went, exhausted after a busy day.  My mind was empty and tired and I was off like a light.

Then the dream began.   I don’t usually remember my dreams, but this one I did.  In my dream I had a few carry trades open that were suited to a risk favourable market.  The trades were going well, and then………………I fell off a fiscal cliff.  Well, not me, my trades did.

In my dream I’d been away from the computer and when I came back to check my trades I had huge negative balances in all my broker accounts of varying degrees.  I could see the exact numbers screaming out at me in a bold red color.  The account balances in red.  I’ve never seen that before!  I could even feel my heart pounding hard in my chest while I slept.  In horror I realized my trades had gapped over my stops massively wiping out my accounts and then some.

Luckily it was just a dream.

Damn that subconscious mind!  Subtle things can really play on your mind.  You need to be careful about what you let in as it affects you.

For beginner traders the emotions tend to run pretty raw and can be difficult to control.  Freezing up and stopping trading as doubt creeps in is common while for others more reckless aggressive behaviors may be taken to “get back” at the market.

As you become more experienced you have a greater trading history to draw on.  You’ve seen yourself pull through to greater profits.  You know what it takes.

Successful traders have strategies in place to put them in an objective and stable frame of mind for trading no matter what has gone on with recent trading or life in general.  These strategies can help traders of all levels make consistent objective decisions and lessen the impact of the fear of losing and greed of winning.

These are the kinds of influences that make sound trading psychology so essential for consistently profitable trading.

 

Self Reflection

What do you let into your life that has a negative affect on your trading?

What helps you regain objectivity to make consistent decisions not influenced by greed or fear?

Have you had nightmares about your trading or lost sleep over it?

 

Thank you for reading this post.

Please leave a comment below and click the like/share buttons

About Rachel Hunter TraderRachAbout the Author: I’m Rachel Hunter, TraderRach, a Forex Trader who helps traders achieve the life they love with forex.  Be strategic and design your trading business for sustainable success and have fun!  That’s my mission.  Join many traders’ gaining the edge with “10 Powerful Lessons for Forex Trading Success” plus other goodies.  Years of precious learning specially packaged up for you.  My background before trading is as a Chartered Accountant and Chief Financial Officer.   I know what it takes to make a trading business rock on.  It would give me great pleasure to make a difference to your success.

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Categories: Trading Psychology

4 Responses so far.


  1. Hi Rachel
    what a bad nightmare you’ve had !!!
    Fortunately, I haven’t had such a dream about my trading activity

    Greed or fear are frequent fault in novice (and sometimes more experienced) trader.
    To avoid greed and fear I think it is necessary to master a strategy, to believe in it and believe in our own analysis. That doesn’t mean to be blind to reality. So, I never read forum or other analysis before doing my own analysis. I did it on the first months of my trader life (nobody is perfect !!) but it was a mistake. When you read other analysis before, there is always an argument that put in a doubt in your brain and distort your opinion about the market and the chart.
    Of course I often read what other traders thought when my trade is ended, especially if my trade ended in a wrong way because I want to know where I’ve failed.
    Here are some of my thought about your article, Rachel. And indeed , you have a very nice and useful website
    Merry christmas and best wishes for 2013 and your trading
    Alain

    • Rachel says:

      Hi Alain

      I agree with your comment and thank you for sharing it.

      I’ve learnt that just because a trade lost doesn’t make it wrong. All trades have a probability of being winners or losers. We make choices about where we will enter and exit often based on broad risk multiples inherent in our strategies, among other things. Our choice of exit determines whether we win or lose on an individual trade. A trade is right if it was consistent with our strategy and wrong if our strategy said we shouldn’t have taken it, but we did.

      It’s good to review trading after it’s over like you said to look for ways to improve a strategy, but not to worry about changing the outcome of an individual trade.

      Cheers Rach

  2. Andrew says:

    The Fiscal Cliff… If it is one thing I have learned over the years, it’s this…bad news sets up great short term trading opportunities, especially to the long side (on the stock indices, AUD etc or short JPY or DX or whoever has the lowest interest rates at the time). These types of news events are excellent trade setups.. Incidentally at the end of 2012, beginning of 2013 I had my best 3 days ever on a series of short term trades becasue of the fiscal cliff situation. So Rach next time you have a nightmare like this, go long the currencies that a long biased towards the stock indices.. ;-).. As you know every other punter will be short becasue they are trading based upon the negative influence of the press.. only a small percentage of traders win so it pay to be on the other side of the coin.

    • Rachel says:

      Hi Andrew

      Great you’ve had some awesome days trading while I was lying on the beach soaking up the sun. In New Zealand you’re showing great commitment to be working at that time. I hope you get a break sometime.

      Thanks for the advice. However, I have strategies that I stick to strictly but they respond quickly to any change in direction. I can be flipping direction while everyone else is absorbed in the news talking up the other way. That’s why I don’t like reading news since I don’t follow it and all it does is make me uncomfortable. Saves a lot of time too.

      Cheers Rach

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