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 hits two-day highs near 1.1820
EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY drops back below 157.00, as focus shifts to Japan snap election
USD/JPY is back in the red below 157.00 in the Asian session on Friday. The Japanese Yen recovers ground against the US Dollar amid some profit-taking ahead of Japan's snap general election on Sunday. The preliminary reading of the Michigan Consumer Sentiment Index report for February will be released later on Friday.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates Premium
The EUR/USD pair lost additional ground in the first week of February, settling at around 1.1820. The reversal lost momentum after the pair peaked at 1.2082 in January, its highest since mid-2021.
Gold: Volatility persists in commodity space Premium
After losing more than 8% to end the previous week, Gold (XAU/USD) remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000.
GBP/USD: Pound Sterling tests key support ahead of a big week Premium
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Bitcoin: The worst may be behind us
Bitcoin (BTC) price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
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