Quotes: MENA   Enter Symbol: NewsLetter: Search: advanced

3 Ways For Traders To Manage Unruly Emotions  Join our daily free Newsletter

MENAFN - DailyFX - 17/06/2013
No. of Ratings : 0
Add to Mixx!

(MENAFN - DailyFX)

Article Summary:Because trading is a flood of opportunity for both buyers and sellers, emotions often run rampant. However, making the best decision from a trading point of view is often the hardest emotional decision to make. This article will help you on the battlefield of trading by pointing out 3 key ways to keep your emotions in check so you can win the battle that so many before you have lost.

“Successful trading is always an emotional battle for the speculator, not an intelligence battle.”

-Jesse Livermore

Knowledge is paramount to trading well. There is no doubt that an understanding of different indicators to apply to a chart or understanding of the fundamental factors that show an economy’s weakness or strength can help you gain an edge. However, knowledge can only take you so far and those who focus only on knowledge or intellect are often standing in harm’s way when their money is on the line.

That harm shows up in the form of emotions. Emotions going unchecked often cause a trader to trash the concept of risk to reward or trade a very large size, which is a common predecessor to large losses. Therefore, the advanced trader would do well to know how to limit the negative effect of emotions on your trading.

Why Emotions Are A Problem?

Certainty in an executed trading idea is often a guise for greed and fear. As a trader, it is important to have a plan which focuses on entry triggers, trade size, and risk to reward ratios so that you’re acting in a mechanical manner. However, you should also be willing to exit your trade or accept the fact that moving forces in the markets can change quickly so you can avoid the painful experience of holding on to and closing out larger losses than winners.

Learn Forex: Emotions Alone Would Cause a Trader to Hold This GBPAUD Trade Short

Keep_Your_Trading_Emotions_In_Check_body_Picture_3.png, 3 Ways For Traders To Manage Unruly Emotions

Presented by FXCM’s Marketscope Charts

The opportunities in the Forex market are almost infinite. Any trader around the world can trade on any time frame using nearly any strategy. In the end though, the market will either rise or fall and regardless of your strategy for identifying an entry, you need to know when to eject from the trade idea so that you’re not holding a long position in a bear move or a short position in a bullish rip higher.

3 Focal Points to Manage Emotions

1. Earlier this week, we discussed how key the concept of uncertainty is to our trading success . This belief that anything can happen at any time should allow us to be flexible on a mental level so that we’re willing to exit a trade with mounting evidence. From the start of your trading career, you should be able to avoid holding onto to any ‘Enron trades’ that can wipe a trading career off the map because you’re looking for new data that causes you to exit the trade.

2. Trade size is something that is more paramount to overall trading success than many new traders realize. Most new traders will run out to find and buy the hottest system on the market, which was likely optimized and back tested in market conditions that aren’t present and won’t perform close to their intended results. Here is a quote from a famous trader, Larry Williams that many admire after his great trading book,

How I Made One Million Dollars…Last Year…Trading Commodities, hit the shelves in 1979 that discusses trade size:

“Thus, what we need to do is under-bet our system or approach. Do not put as much money behind the system as the numbers from the past suggest you can. For most of us a 5% risk factor is all that’s needed to do rather well in this business…Under-trade, under-bet and you will be overwhelmed with your results...”

-Larry R. Williams

Personally, I’ve noted that a smaller trade size keeps me more objective on exiting a trade as well as allows me to stay in trades longer. Objectivity leads me to focus on reasons to exit a trade when the facts supporting the trade change. The smaller trade size also encourages me to stay in a trend longer because I’m not as eager to close at the trade at the current profit but rather let the trend run its course which often surpasses what I expect. To learn other ways to manage your risk, you can register for our free online course here.

Learn Forex: Small Trade Sizes Allow Traders to Emotionally Ride Out a Trend

Keep_Your_Trading_Emotions_In_Check_body_Picture_2.png, 3 Ways For Traders To Manage Unruly Emotions

3. Lastly, a focus on exiting strategies over entries will give you a healthier view of the market. Many traders use candlesticks or an overbought / oversold reading on the Relative Strength Index (RSI) to get out of a move. The key point is that when traders focus only on the entry, they’re often likely to hold onto a losing trade until it breaks even and that is often the death-nail of a trader’s career that we heartily recommend you to avoid.

If at the end of the day, you’re still uncomfortable trading yourself there are other options. FXCM offers a Mirror Trader Platform which allows you to follow the strategies and signals of other traders. It can be an ideal solution for trading who follow FX markets, but don’t always have the time or comfort to trade systematically.

Closing Thoughts

The three concepts in today’s article are meant help align your thinking with that of professional traders so that you do not get emotionally attached to any of your trades. It’s commonly said, ‘there are old traders and there are bold traders, but there are few old and bold traders’. The truth that can be gleaned from that statement is that traders who have stood the test of time have found a way to conservatively grow their capital without absorbing career ending drawdowns and we hope you learn to do the same.

Happy Trading!

---Written by Tyler Yell, Trading Instructor

To contact Tyler, emailtyell@fxcm.com.

To be added to Tyler’s e-mail distribution list, please.

Take this free 20 minute “Price Action - Candlesticks” course presented by DailyFX Education. In the course, you will learn about the basics of price action and how to use the clues the market is providing to place trades. Many traders feel the price is always the #1 indicator so it is helpful to know how to read it as it unfolds.

Register HEREto start your FOREX learning now!



  MENA News Headlines
 Oct 22 2016 - EU regrets withdrawal of South Africa from ICCKuwait News Agency (KUNA)
(MENAFN - Kuwait News Agency (KUNA)) BRUSSELS, Oct 22 (KUNA) -- The European Union has expressed its "deep regrets "over South Africa's decision to initiate its withdrawal from the International ...

 Oct 22 2016 - Kuwait- KUNA main news for Saturday, Oct 22, 2016Kuwait News Agency (KUNA)
(MENAFN - Kuwait News Agency (KUNA)) Local: KUWAIT -- With attendance of the visiting Queen Silvia of Sweden, Information Minister and Minister of State for Youth Affairs Sheikh Salman ...

 Oct 22 2016 - Swiss NGO honors Kuwaiti-based institute for global effortsKuwait News Agency (KUNA)
(MENAFN - Kuwait News Agency (KUNA)) By Nawab Khan BRUSSELS, Oct 22 (KUNA) -- The Arab Planning Institute (API), based in Kuwait, has been awarded the prestigious Gold Medal by the Crans Montana ...

 Oct 22 2016 - Kuwait- Info. Min. decides: Ban on primaries, reputation smearing, financial incentivesKuwait News Agency (KUNA)
(MENAFN - Kuwait News Agency (KUNA)) KUWAIT, Oct 20 (KUNA) -- The Minister of Information has issued a Ministerial Resolution stipulating total ban on primaries, tit-for-tat mudslinging among ...

 Oct 22 2016 - Boursa Kuwait ended last week with mixed performanceKuwait News Agency (KUNA)
(MENAFN - Kuwait News Agency (KUNA)) KUWAIT, Oct 22 (KUNA) -- Boursa Kuwait ended last week with mixed performance, as the Price Index closed at 5,321.46 points, down by 0.12 percent from the week ...

 Oct 22 2016 - US Secretary of Defense to meet with Iraqi Prime MinisterKuwait News Agency (KUNA)
(MENAFN - Kuwait News Agency (KUNA)) BAGHDAD, Oct 22 (KUNA) -- US Secretary of Defense Ashton Carter arrived in Baghdad on Saturday to meet with Iraqi Prime Minister Dr. Haidar Al-Abadi along with a ...

 Oct 22 2016 - Kuwait- Info. Min. launches campaign for covering legislative electionsKuwait News Agency (KUNA)
(MENAFN - Kuwait News Agency (KUNA)) KUWAIT, Oct 22 (KUNA) -- Minister of Information and Minister of State for Youth Affairs Sheikh Salman Sabah Salem Al-Sabah announced on Saturday the launching of ...

 Oct 22 2016 - Nizzolo wins Stage 1 of Abu Dhabi TourKhaleej Times
(MENAFN - Khaleej Times) Reigning Italian champion Giacomo Nizzolo (Trek - Segafredo) won Stage 1 of the second Abu Dhabi Tour as he outsprinted John Degenkolb (Team Giant - Alpecin) and race ...

 Oct 22 2016 - UAE- Two jailed for sharing indecent video of disabled manKhaleej Times
(MENAFN - Khaleej Times) Two Arab nationals were sentenced to three months in jail by the Sharjah court for capturing photographs and videos of a mentally-retarded man in an indecent manner and ...

 Oct 22 2016 - Kuwait FM delivers lecture at Atlantic CouncilKuwait News Agency (KUNA)
(MENAFN - Kuwait News Agency (KUNA)) WASHINGTON, Oct 21 (KUNA) -- Kuwait's First Deputy Prime Minister and Foreign Minister Sheikh Sabah Khaled Al-Hamad Al-Sabah delivered a lecture at the Atlantic ...





Middle East North Africa - Financial Network

MENAFN News Market Data Countries Tools Section  

Middle East North Africa - Financial Network

Main News
News By Industry
News By Country

Search News
Market Indices
Quotes & Charts

Global Indices
Arab Indices


Oil & Energy

Currencies Cross Rates
Currencies Updates
Currency Converter

USA Stocks
Arab Stocks

Saudi Arabia 

Economic Calendar
Financial Glossary

Financial Calculators

RSS Feeds [XML]

Corporate Monitor


Real Estate
Submit Your Property

Arab Research
Buy a Research

Press Releases
Submit your PR

Join Newsletters

© 2014 menafn.com All Rights Reserved.  Terms of Service | Privacy Policy | Contact Us | Advertise | About MENAFN | Career Opportunities | Feedback | Help