Trading the Forex market from the comfort of your home computer chair can offer a huge amount of freedom, a nice secondary income stream, and when it’s done wrong – enough stress to turn your heart inside out.
Forex trading is an educational, psychologicaland personaljourney. Everyone is on their own private questto reach the ultimate ‘end game’–becoming a full time trader.
Is your journey going to be filled with sleepless nights, a constantlychurned upstomach, and just making you not a nice person to be around?
Will you even make it as a Forex trader? Or, will you become your own worst enemy,allowingcommon trading behaviorstoamp up yourstress to palm sweating levels–killing off anychance you had offulfilling yourForex dream.
Today’s article is a really important one – I am going look over what I believe are the most common causes for excessiveForex trading stress.
It’s time to stop reaching forthe anti-depressants, re-gain your integrity&clarity,and put a stop to theself-sabotage behaviors that cause the unnecessarydamagein your Forex trading, andto your health.
Taking On Too Much Risk
Taking on too much risk, is the greatest catalyst to trading-related stress.
It doesn’t matter if you’re a newbie, or an experienced trader with a good trading record– the thought of losing a sizable chunk of capital and going through draw down will flare up dangerous emotions. This is common knowledge for most traders, yet there are still a lot of people biting off more risk than they can mentally deal with.Why?
- Desperation
- Urgency
- Arrogance
- ExternalFinancial Pressure
- Lack of Patience
Traders will switch on their high risk gambling mentality for ‘quick fix results’. Gainingthe willpower to change this behavior is the one of thesingle most effective things you cando for better long-term success and viability.
Have you ever heard that inner voice telling you, “this trade is just too good, I could make a fortune!” – so you pump up the trade risk. Or, maybe you just think you’re the worlds best market analyst at the time and yourco*cky attitude fuels you to risk more than you should – you truly believeyour trading decision can’t produce a negative outcome.
Whatever the reason is, your trading train has derailed, and you’re trying moving forward without the support of your trading system orriskmanagement plan.
There are a surprising number of traders out there who really don’t know how to calculate their risk before making a trade. These are the ‘lot size guestimaters!’
Are you a lot size guestimator? If so – you really need to learn how to calculate your position size so you know exactly how much you’re risking.
In our Forex trading course, we’ve dedicated a whole chapter to explaining lot size calculations. We’ve even gone a step further and now offer a free MT4 money management expert adviser to all War Room Traders – which makes calculating risk, and trade execution as easy as clicking 1 button.
It’s your responsibility as a trader to becomean expert risk manager. You should focus onbecoming a wizard at lot size calculations and thrive to be the best at risk management as you can be!
If you find that you are experiencing anxiety when a trade goes wrong (a sickening feeling in your stomach, sweating, increased heart rate, panic, etc.) – then that’s probably a giant red flag telling you, that you shoulddecrease your risk.
Ask yourself, ‘what amount of money’ is allowed bymy risk management plan, and not put me in stupid draw-downif the trade was lost. You’ve got tobe honest with yourself,because you’re in the captain’s chair and all responsibility, and accountability falls back on you and you alone.
Like I mentioned before – Forex trading is not only about making as much money as you can in the shortest period of time, it’s a journey of personal improvement. Some people can stomach large amounts of risk, others can’t, but learn how to as they clock up more trading experience.
If you’re getting panic attacks from trading, it’s a warning sign that you’re doing something wrong.The first way to deal with stress is to acknowledge it, isolate the causeand remedy the situation!
Traders who are on top of their risk management, sleep easy at night.
Checkpoint
As a Forex trader, you need to become an expert risk manager to be successful. Traders put themselves in stressful situations when entering positionsabsent of risk management – one wrong turn and you could lose it all in one go. Make sure you know how to calculate lot sizing and have a strong money management plan to go with your strategy.
Over trading
Over trading usually gets out of control really quickly – “another position won’t hurt… can it”?
Some traders also might find themselves being in too many positions because they build up a fear of ‘missing out’ –It’s a poisonous way to think.
If this is you–write down on a piece of paper in your own words that the market is forever, and there will always be another (and probably better) trading opportunity around the corner. Stick it up somewhere near your trading desk and look at it every time you feel like you have to take a trade because you feel like it is some sort of opportunity that won’t come again.
A lot of traders like to hang out on the lower time frames, which exposes them toincreasedtemptation to trade more.
Candlestick signals which are the basis for most tradingdecisions, carry much less weight in the lower time frames due to the “noise” and general fluctuations. Think of a really noisy phone line – you can sort of hear what’s coming through, but it’s hard to get that clarity you need.
Many traders are brainwashedto believe really low time frames are the prime ‘hunting grounds’ for high quality signals, and areready to pull the trigger… of a trade execution machine gun, rather than the kill shot of an accurate rifle. Even after entering a trade, most traders will continually monitoring theseminor price movements, conditioning themto impulsive, careless trading.
To be honest, I think having more than two trades open is excessive. Think of all the times you’ve opened 3 or more trades and walked away from it all as a winner – honestly it’s not that many times is it… and it is STRESSFUL!
Profitable trading requires constant discipline to identify and take advantage of only the best trading opportunities. If you find yourself opening multiple positions all the time – try adding this rule to your trading plan…
*** Only one trade is allowed to be open (with risk exposure) at anytime. ***
This rule meansif you have a trade open, and the stop loss has not been adjusted to at least break even, then you’re not allowed to open any more positions. That doesn’t mean you should start moving your stop to break even the first chance you get, just so you can open more positions. I only ever move my stop if my trade has extended into good profit, and I feel can survive a trend correction without being taken outout.
If you can actually apply yourself and stick to a rule like this–you will always be looking for the “best trading opportunity”; I do believe focusing on one trade at a time will help you trade less, but make more.
When you have several trades going at once, not only are you likely to be risking too much, but you have more things can go wrong.
Traders should always think in worse case scenario. What if you risked 2% each on five trades going simultaneously, and then you have four losers and only one winner? You’ve just lost 8%on those 4 trades. This is a very common scenario because trades opened around the same time are generally highly correlated – when one goes down the rest usually do too.
Are you thinking worse case scenario? Have you got too much risk exposurewhere you feel like you need to keep checking your account and “micro manage” the situation. It’s not healthy, think about the big picture – trade less frequently, aim for higher risk reward targets and make more.
Checkpoint
Traders who over trade lose control really quickly. Generally this occurs because of the attraction of lower time frames and high frequency trading–which often leads totaking lots of low quality signals, causing stressful losses to stack up. Trystick with the ‘one trade at a time’ rule to prevent the killing nature of over trading.
Trading with money that isn’t yours
When traders discover Forex and are pumped with the ‘unlimited profit potential’ marketing out there, they want to start trading ASAP. Urgency and desperation kick in and they start looking for solutions to get their accounts funded up quickly.
Desperate traders usually source quick money from:
- Personal Loans
- Credit Cards
- Mortgage Extensions
- Money Needed for Living Costs
- Loan Sharks
- Borrowing Money Off Other People
Looking over this list should send shivers down your spine when you think about the risks here. Obviously putting yourself in debt to trade Forex is highly inadvisable. Trading with money that you don’t really own in the first place is already going to put you in an extra stressful situation.
When friends and family find out you’re into Forex trading and even making some money off it, they may be keen to invest in you.
It may be tempting to take their money and trade with it, but take my advice here– it’s a bad idea for two reasons. Years ago I accepted $40,000 of my friend’s savings to invest in Forex. His business wasn’t doing well and he wanted to put his money somewhere where he could get some good returns.
I felt sorry for him, wanted to help out. I thought I could handle it – but boy was I wrong.
Bytaking onthe responsibility of his life savings, my Forex trading experience completely changed. I found things I was doing normally, SUPERstressful. I couldn’t take my mind off the markets when I had trades open, suffered anxiety through the day, and had trouble getting a good night sleep. I wasn’t doing anything reckless – it was my good friends money and if something went wrong and I lost it I wouldn’t be able to live with myself.
The stress really got to me.
Imagine if I had a CHF trade open with his life savingson the line, and the SNB pulled their moveat that point in time. I would have ruined my relationship with him, which is my second reason not to accept borrowed money to trade with.
People who give you money, and don’t really understand Forex trading will have very very very high expectations of you – if you don’t perform to their expectations things can get nasty.
I returned his money to him without loss or incident and left it at that. Moral of the story, only trade with your own money – no matter how good you think you are. Trading someone else’s money who doesn’t understand FOREX is a hard lesson you don’t want to learn.
Checkpoint
Make sure you only trade with your own investment money. Trading with cash that doesn’t belong to you can be very pressuring and super stressful. People who invest money in you probably won’t understand much about Forex and be pushing you for fast returns. Always think worse case scenario.
Too Much ScreenTime
I know a lot oftraders, especially new traders, have a tendency to spend far too much time looking at their charts and watching their trades.
Don’t stare at the charts, this leads you to be likely to react “in the moment,” based on the emotions you are feeling and not on the validity of the trade in the first place.
If you find yourself feeling stressed out over your trades, definitely remove yourself from your screen (preferably go somewhere where there is no access to the trade terminal).
This includes trading apps for your phone! You need to resist the temptation and give yourself a break from trading entirely. So, if you find that your mobile app is not helping and temptingyou to make poor decisions, it may be best for you to just remove it.
Personally I don’t see the value in many Forex mobile apps. It’s difficult to get proper clarity from a mobile screen.
A change of scenery is often helpful to de-stress from trading. Whether you go for a jog or read a book; focusing on something else for a little while can be helpful in putting yourself back into the proper state of mind. Try an activity that will put you into a positive mood, such as watching a good movie or hanging out with friends. Try to surround yourself with positive people.
Whatever you do, don’t micromanage your trades.
If you are sitting there staring at the charts, you’re going to feel compelled to “do something.” I believe in a ‘set, forget, and collect approach’. You analyze your opportunities, choose one, choose the entry, exit and stop, and then walk away and let it play out without interference.
Once the decision is made, go out and live life!
Checkpoint
You don’t need to sit and stare at your trading screen all day. If your strategy requires you to do this, ditch it and move on to something else which can offer you a better quality of life while you trade. If you find yourself unable to disconnect, try forcing yourself to go for a walk, or the gym – something that will put a break between you and the charts.
Unhealthy Lifestyle Choices
The nature of trading has one sitting in the same place all day, doing very little aside from using their brains. So, it is really important to counterbalance that with some physical activity.
Make sure that you are getting sufficient sleep and keeping a fairly consistent schedule.
It’s not good for your body to constantly be swinging your sleep schedule around and to not get enough sleep in general. If you are operating on too little sleep, you’re going to make more mistakes and bad decisions.
And of course, try to eat as healthy as possible.
Your body is like a machine, and it will operate best when it’s fed the best fuel, gets enough rest, and isn’t surviving just off energy drinks. If you keep these three things in mind, your trading and your body will thank you!
Checkpoint
Just like your car engine, your body needs good fuel and maintenance. If you neglect your car engine, or give it bad fuel – it will perform badly. Your body is no different, clean up your diet and exercise regularly so you can always be at the top of your game when making trading decisions.
UsingA StressfulTrading System
These kind of systems looks really ‘flash’, but don’t really make sense when you look into them. This can be very confusing and reallystresses the trader out, because ultimately they’ve got no idea of what’s going on.
The more complex your trading system is, the more complicated every decision you make has to be. I strongly believe that traders achieve better results by keeping things simple. Thats whywe use price action strategies, focusing on the important points of the markets like support/resistance, mean value analysis and effective candlestick signals.
It doesn’t get much simpler than that!
Living under the constant burden of stress can literally stop us in our tracks. Some people resort to avoiding or abandoning their responsibilities altogether or engaging in self-destructive behaviors if it becomes too overwhelming, so it is important to nail down our stress triggers and find solutions that we can realistically work in to our lives.
If you’re looking for a Forex trading system that is straightforward, offersclarity in your market analysis and just downright simple and effective – you’re probably going tobe very interested in price action trading strategies. Feel free to stop by our War Room Information page, our war room contains one of the most comprehensive price action trading courses!
I hope that this article has been an eye opener, or a kick up the ass at least, and encourages you to move forward with a moreproductive and satisfying trading experience.
Remember, stress in trading is mainly driven by our behaviors and from being unable to control the market. We cannot control the market, but we can control our behaviors and our reactions to it!
Cheers and good luck on the charts.
