How to Handle Your Forex Trading Worries

Updated from its original posting on 2011-06-24

In the simplest sense of the word, worrying is to feel concerned or uncomfortable, oftentimes (but not always) in anticipation of a negative event or outcome. After all, we’re all human and we have the basic need to avoid pain.

For traders, the major sources of psychological pain tend to involve losing capital and/or being on the wrong side of trades. Along with these issues, our worries can be compounded with concerns of missing trade opportunities or forgetting an important variable during analysis. As we can imagine, our list of worries can go on and on.

If not handled properly, worrying can become a big hurdle to success as it can lead to a host of different issues. For instance, have you ever impulsively changed your profit and stop loss levels only to find out that your original levels were correct in the first place? Because you let your worries of losing or being wrong get to you, you ended up not following your trading plan.

Fear and worrying redirects our focus from the situation at hand and we may end up making impulsive or irrational trade decisions. Even worse, sitting there and worrying about something without taking action can be unproductive and a plain waste of time.

Worrying can be used as a signal for different issues: maybe you could have planned better, your position may be overleveraged, or maybe you may be avoiding a harsher reality outside of trading.

If you catch yourself worrying about the small details that you think you shouldn’t obsess about, ask yourself, “What am I really afraid of?”

For instance, let’s say you realize that you’ve been obsessing about your losing trade–which is only a measly 0.1% of your account–then you have to ask yourself what it is that you’re truly afraid of. Is it the future of your trading career? Your monthly mortgage payment? The new boyfriend of your fifteen-year old daughter?

Whatever it may be, imagine yourself in this worst-case scenario and think about what you’re going to do if you were actually in it. Maybe if you outline your goals as a trader, start saving some extra cash for the mortgage, or scare off your daughter’s boyfriend (I’m kidding!), you’d be able to relieve yourself of the anxiety and focus more on trading.

This self-critical exercise is called visualization and it may give you more feeling of control over the situations that you’re dreading. Visualization can be another form of learning and experience, and with deliberate practice of this exercise when you worry, over time your fears will become less of a worry for you.

  • utalk

    Visualization it’s an important thing that if you manage to learn it an practice more with it will help in the future. But I think this only can be learned in time and after many obstacles. Like forex, you will not know how to trade but only after many challenges/obstacles (depend on you how do you see it, or how do you choose to see it).

    It’s important to know your feelings/self, to learn from them and to prevent some unwanted actions in that way.
    But how can you learn from them if you don’t know how you will react in some cases? Yes it’s great that you know that “if this will happen, I will do that or that for sure”? Are you sure, or someone told you that? How can you know that if you haven’t experienced that yet?
    So, in a controlled environment (I mean demo account) I think you must experiment many things/trades just to know yourself/feelings and to, in that way, increase your self confidence, and in the future to know that in some situations you will react in “that way”. Practice makes you successful.

    Anyway, thanks Dr Pipslow for the articles, there are very educative and they never age.
    Keep up the good work.