Why you should control your actions and not your emotions when approaching trading

Success in the Forex markets does not rely exclusively on the system or strategy you use, it actually depends mostly on your mind frame and your reaction to the markets.

At this point there’s a plethora of market analysis and opinions available online. There are hundreds of sites that will tell you what the market is going to do next and they are going to convince you that their trading strategy is the winning one.

Being educated does not mean that you are a successful trader. Yes, it can give you the information you need to analyse the markets and make decisions but it takes more than that to succeed.

Once you soak up all the information, you are eager to put it in practice. This can be exciting and a bit scary at the same time. Best case scenario, you may place few successful trades and gain a lot of confidence.That will push you to place more trades, maybe get more aggressive in your trading…then you will quickly realise why 90%+ of traders fail.

Being a successful trader takes a lot of discipline to learn how to control your emotions...or so we thought. The industry has been telling us for years that traders fail because they let their emotions interfere with their trading decisions.

Then neuroscience put poker players, traders, and other risk-takers into brain scanners. They discovered that all decisions depend on existing emotions. How our bodies feel will influence what we think and the decisions we make.

In fact, in an effort to determine if traders think rationally about each trade or they go with their intuition, researchers at the California Institute of Technology took pictures of people’s brains while they were evaluating trades. This showed that more often than not, traders will go with their gut feeling, no matter how long they spend analysing and researching.

Now here’s an interesting twist in the plot: research indicates we can only make a few – maybe as little as two – “disciplined” decisions in a row. Therefore, sitting in front of charts for hours on end and watching every tick is not going to be beneficial for your trading.

Here’s what you can do:

  1. Avoid visual sensory habituation by moving your eyes around and shifting your physical position.
  2. Get into the habit of having a structured plan for getting up and away from market quotes. This will in-turn most likely produce an increase in P&L.
  3. Manage stress by performing breathing techniques to oxygenate your brain.

Strictly speaking, taking a short physical activity break like going to the gym or going for a walk in the middle of the day or even in the middle of a trade, will enhance your trading psyche to make the most profitable decision on a trade’s exit point.

In conclusion, the connection between body, feelings and emotions is undeniable in the decision making process, therefore controlling your emotions is obsolete. In reality we only have to control our actions. Any of us can feel anything at any point and not act on it, in fact we do it all the time.

What we feel or sense in our emotional state should be considered as data and be carefully analysed. So don’t ignore them, just learn how to use them efficiently to become a better trader.

When you face defeat, you need to have a routine that can keep you from making matters worse. The more times you reinforce the habit, the more likely it will become second nature.The real challenge will be developing a routine to help you be mindful in your actions.

This article is written for educational purposes only. The author expresses personal opinions and does not give investment advice. The reader should not rely on any material within this article to make (or refrain from making) any decisions or take (or refrain from making) any actions. Please note that trading in forex and other leveraged products may involve a significant level of risk and is not suitable for all investors. Before undertaking any such transactions you should ensure that you fully understand the risks involved and seek independent advice if necessary.