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 clings to gains above 1.0750 after US data
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GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
USD/JPY bounces of key level in softer NFP print
The Japanese Yen is set to lock in a staggering performance for this week against the US Dollar. The Yen has appreciated over 3% following Japan’s intervention to propel the currency and the Fed’s less-hawkish rhetoric. The US Dollar Index slips below 105.00 with softer NFP print.
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.
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