FX TRADING PSYCHOLOGY
Successful traders learn how to control these emotions, while struggling trades allow them to influence their trading decisions, resulting in the self-sabotage of their trading results. The connection between emotions and money comes from one’s core beliefs that were instilled in them from a very young age. Therefore, it would be foolish to assume that they can easily be changed overnight. Just like a bad habit, getting rid of these believes and emotions shouldn’t be the goal. Rather the focus should be on how to replace them.
Process Over Outcome In
order to make a change a
trader must shift what gives them pleasure and pain. Typically pleasure and pain are directly related to the outcome of the trade. A profitable trade provided the trader with pleasure, while a losing trader causes the trader pain. The same can be said for how “good” and “bad” trades are defined with “good” being used to describe a winning trade and “bad” being used to defined as a trade that loses. These associations are based off of
the outcome of the
trade, something that we have zero control over no matter how great our system is. Instead of punishing or rewarding ourselves over something that is out of our hands, we need to focus on controlling what we can control and that’s the
62 FX TRADER MAGAZINE April - June 2016
execution of the trade. A system/ strategy with a positive expectancy means that the trader has an edge over the market. It’s impossible to predict the outcome of any given trade, but when trading with an edge we can be quite confident that the long term results will be in our favor. Therefore, the only job is to consistently execute the system/ strategy day in and day out. For a trader with this type of mindset pleasure and pain are no longer based off of the outcome of any given trader, rather they’re strictly determined by whether or not the trader has followed the correct process for executing the trade. Win or lose, a “good” trade is defined by the trader following their rules and a “bad” trade is defined by a trader making a mistake.
Eliminating Mistakes
The Japanese have a philosophy called “Kaizen” which means continuous
this
focus would be on eliminating my trading mistakes. I knew that a task like this couldn’t be achieved overnight so I made it my goal of mine to end each month with at least a single less mistake than the previous month. That meant that if I made 20 trading mistakes during the month of January, then my goal for February was to make no more than 19.
It was a lengthy
process but as I slowly started to reduce my trading errors, my account started to grow as a direct result and more importantly so did my confidence.
Unconscious Competence improvement.
After World War II the they implemented
philosophy/
management concept into many of their factories looking to take a slow and steady approach at rebuilding their economy and industry. I took this same approach with my trading and in late 2010 I looked myself in the mirror and decided that I would no longer concentrate on winning and losing trades, or profits and loss statements. Rather my single
This is the final stage of trading where a trader seems to be running on autopilot. Trading has become somewhat boring and monotonous due to the fact that trader is analyzing the markets and executing the same type of trades day in and day out. The rush that comes with being up big is rarely there and the emptiness that comes with being in the red no longer has an effect. All that matters is the consistent execution of the trading plan and if you can completely control that, then you’ll have full control over your trading future.
Akil Stokes Chief Currency Analyst
and Head Trading Coach Trade Empowered
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