In forex trading, also winning can be dangerous. Some traders get euphoric, make bad trades and eventually kill their forex account. This can happen to anyone. Here are 5 tips for overcoming it.
So you’ve learned forex at a course or by yourself and trained yourself with technical analysis using a forex demo account. Now you’re absolutely ready for a real account. So, you open an account and things begin well:
Now you feel more confident and double the size of your trade. You win again and you regret not placing the large trade size beforehand. Another win, and you feel that you’ve learned the system. Yet another win and you feel invincible. Who needs a strategy when you’re winning?
With all this confidence, you find yourself in a bigger position. The trade now goes against you and you move your stop loss away. The trade loses, and then you see it shoot the other way. You’re still certain that you know how to beat the markets. This slap doesn’t get you to reduce the size of your position, but just put a deeper stop loss. Another loss makes you want revenge. Dealing with losses is something you’re not familiar with.
Analyze a winning trade: Many traders analyze their losing trades and take the lesson for the next trade. This is great! Do it also for winning trades. There’s a lot to learn from those ones as well.
Take a break: Don’t rush into a new position immediately. This will probably be a hasty and losing position.
Don’t drool on your larger account: It sure is fun seeing more money in your account, but it doesn’t help you being a better trader. This is a waste of time and you can become over-confident.
Don’t enlarge your position sizes: Yes, you could have made more money with a larger position on a winning trade. This goes both ways – you can lose more money in your next trade. Change the positions only periodically.
Withdraw winning money: Occasionally withdraw money from your forex account to your regular bank account. Seeing less money will weaken the euphoria sensation and also minimize the sum that you can lose…
So you’ve learned forex at a course or by yourself and trained yourself with technical analysis using a forex demo account. Now you’re absolutely ready for a real account. So, you open an account and things begin well:
The Euphoric Scenario
You’ve followed your strategy, placed a trade and closed the position with a nice win that was lower than your Take Profit point. You then planned another trade, placed it and saw the trade close at your Take Profit point. Perfect!Now you feel more confident and double the size of your trade. You win again and you regret not placing the large trade size beforehand. Another win, and you feel that you’ve learned the system. Yet another win and you feel invincible. Who needs a strategy when you’re winning?
With all this confidence, you find yourself in a bigger position. The trade now goes against you and you move your stop loss away. The trade loses, and then you see it shoot the other way. You’re still certain that you know how to beat the markets. This slap doesn’t get you to reduce the size of your position, but just put a deeper stop loss. Another loss makes you want revenge. Dealing with losses is something you’re not familiar with.
You know the end – the account is wiped out.
I’m sure that some of you have experienced a similar scenario.Analyze a winning trade: Many traders analyze their losing trades and take the lesson for the next trade. This is great! Do it also for winning trades. There’s a lot to learn from those ones as well.
Take a break: Don’t rush into a new position immediately. This will probably be a hasty and losing position.
Don’t drool on your larger account: It sure is fun seeing more money in your account, but it doesn’t help you being a better trader. This is a waste of time and you can become over-confident.
Don’t enlarge your position sizes: Yes, you could have made more money with a larger position on a winning trade. This goes both ways – you can lose more money in your next trade. Change the positions only periodically.
Withdraw winning money: Occasionally withdraw money from your forex account to your regular bank account. Seeing less money will weaken the euphoria sensation and also minimize the sum that you can lose…
Editors’ Picks
EUR/USD flirts with daily highs, retargets 1.1900
EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.
GBP/USD remains well bid around 1.3650
GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.
USD/JPY edges up above 153.50 with all eyes on US CPI figures
USD/JPY appreciates above 153.00 but remains on track for a 2.4% weekly loss. Trading volumes remain subdued on Friday, ahead of the IS CPI release. The Yen remains supported by hopes of a stable government and calls for further BoJ tightening.
Editors’ Picks
EUR/USD: Yes, the US economy is resilient – No, that won’t save the US Dollar Premium
Some impressive US data should have resulted in a much stronger USD. Well, it didn’t happen. The EUR/USD pair closed a third consecutive week little changed, a handful of pips above the 1.1800 mark.
Gold: Metals remain vulnerable to broad market mood Premium
Gold (XAU/USD) started the week on a bullish note and climbed above $5,000 before declining sharply and erasing its weekly gains on Thursday, only to recover heading into the weekend.
GBP/USD: Pound Sterling remains below 1.3700 ahead of UK inflation test Premium
The Pound Sterling (GBP) failed to resist at higher levels against the US Dollar (USD), but buyers held their ground amid a US data-busy blockbuster week.
Bitcoin: BTC bears aren’t done yet
Bitcoin (BTC) price slips below $67,000 at the time of writing on Friday, remaining under pressure and extending losses of nearly 5% so far this week.
US Dollar: Big in Japan Premium
The US Dollar (USD) resumed its yearly downtrend this week, slipping back to two-week troughs just to bounce back a tad in the second half of the week.
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