Volatile & Sometimes Chaotic – Forex Traders Experience It All
Forex is known to be a volatile market, but that is not a trait that you want to experience as traders. Forget all you have seen on TV or in films. Volatile, over-excited psychology does not make for a good Forex trader.
It is suggested by psychologists and psychotherapists that human beings operate within the chaos theory, where fear of chaos actually invites more chaos. That fear invites caution and caution attracts fear. Now, this blog is not going to be about chaos theory you will be relieved to read, but how as Forex traders, we can avoid our own fear and the behaviour it initiates from negatively impacting our trades.
Response To A Stressful Environment
Our minds and bodies respond to the flight or fight response that is genetically bound to us. Unlike animals, we don’t necessarily have to see the lion to fear it; we can visualise that fear within our psyche. Doing so lets it affect us, and from that, we can see certain patterns arise. Stress and excitement can present with similar effects, and it is how we interpret them that leads to whether they have a negative or positive impact.
- Display of physical anxiety symptoms
- Decision making affected
- Mood swings
- Erratic behaviour
Several psychological traits can influence our trading abilities, and it is important that we recognise what works for us positively. Actions impact not only on our trading but ourselves as traders. Some stress is inevitable as you wait for a trade to show profit or loss, or to see if your strategy is working. Keeping to a strategy while suffering a run of losses can be incredibly stressful, but it is all part of the job, as is the heart-thumping excitement when a trade starts to gain more than expected.
Allowing the stress you experience, for whatever reason, to influence your trading decisions, is a route to disaster. Negative stress, as with a series of losses, takes its toll on your mind and body. It’s not only exhausting but retaining that flight or fight response can severely affect decision-making, as thought processes tend not to stay focused on the trading but the fear of loss.
Positive stress, as when the trades are running exceptionally well, can equally have a negative impact. It is important to realise that euphoria, created with adrenaline release, also impacts decision making. It can result in rash decisions and a negligent attitude towards your trading plans and set profit/loss levels.
Remaining Cool, Calm & Collected!
The image of the perfect trader! Yet, it is important to keep certain traits in mind as you develop in your trading career.
- Understand risk and its potential.
- Learn to be comfortable with the ‘possibility’ aspect of speculative trading.
- Train to be calm under pressure.
- Train to allow yourself breaks from trading.
- Understand your motivation and build self-confidence.
- Understand the basics of emotions and how to manage them.
All of these and more, alongside learning the ins and outs of Forex trading, are part of the profession. Becoming a trader is not an overnight process and realising this is the first step to becoming successful. There are some shortcuts you can apply, rather than just reading esoteric statements. Managing your emotions does not give you an edge in your trading, only your strategies and trading methods can do that, but emotional management is essential for the success of long-term trading.