One of the ways to ensure that you are in the forex trading arena for the long run is that you limit your losses (at your predetermined stop loss) when the trade has gone against you. This is easier said than done because, without emotions management, there will always be a side of your emotions that is not willing to accept a loss. When you let your emotions rule you, you will let the loss run, praying that it may just reverse and put you back in a profitable position. This is a sure way to the doghouse. You’ve got to accept that picking a loser is not an indication of your self-worth and that it is simply a loss and losses are part and parcel in forex trading. The best way to deal with it is by moving on. Moving on means you don’t emotionally paralyse yourself by keeping a running total of how many losses you’ve had.
So how do you achieve objectivity in your forex trading? One thing for sure is that you would need to constantly remind yourself of your specified rules regularly so that it gets drilled in your head. Below is an example of a checklist that can help you in your emotion management before you make any trade.
- You need to identify your edge, meaning that you need to use a forex trading system that works. You can either develop your own system or apply Black Dog System and/or Forex Trading Made EZ, depending on your forex trading style.
- You need to pre-define the risk of every trade so that you know how much of your capital you stand to lose.
- You need to completely accept the risk and consider the amount of capital that you are willing to risk as already gone.
- You must act on your identified edges without any hesitation or reservation and follow the rules strictly.
- You must reward yourself as the market makes money available to you. You must exit at your pip profit target, be happy with it and treat yourself with that profit. It will make you feel better and more inclined to continue forex trading.
- You must continually monitor your susceptibility for making errors. Make up sheets with your rules on them and read them daily, especially if you intend to be scalper or day trader. This helps you to remind yourself from making the same mistakes over and over again.
- You must understand the absolute importance of these principles and you must train yourself to never violate them.