Updated from its original posting on 2014-02-15
Frustration may be an occupational hazard for forex traders, as losses and even huge drawdowns can happen every now and then. This can result to self-doubt and a lack of confidence in one’s trading plan, which can then lead to overtrading or poor decision-making in an effort to make up for one’s mistakes.
Reflect on your trading experience for a moment and think of an instance wherein you felt frustrated with your performance. Were you able to think clearly with your next trades? Did you take your losses personally and start questioning if trading is really for you?
Traders are competitive by nature and it is precisely this characteristic that makes us vulnerable to being extremely frustrated with losing trades. The good news though is that it is possible to deal with this negative emotion and prevent it from affecting your trading decisions. Here are three reminders for you:
1. Don’t blame yourself!
Trying to bounce back from a loss or climb out of a losing streak is easier said than done. For some, it’s easier to target the frustration at themselves and engage in negative self-talk. If you often find yourself in this situation, you gotta take it easy, dude!
There is no point in blaming yourself for not being able to predict what could’ve easily been a black swan event. Nobody – not even the brightest economists or the hardcore number crunchers – knows for certain what the market’s next move will be. Accept the loss, pat yourself on the back for managing your risk, take note of the lessons learned and move on.
2. Do your homework.
Now if you think your losing trades can often attributed to the lack of preparation, then you have to remind yourself to do your homework. As the saying goes, prevention is better than cure, which means that you are less likely to encounter frustration when you put in enough time and effort in conducting fundamental and technical analysis.
Aside from that, you shouldn’t forget to plan your trades and determine your action steps for various potential market scenarios. Don’t set yourself up for frustration by throwing caution into the wind and coming up with hasty trade setups.
3. Don’t give up on your trading strategy… yet.
Other traders target their frustration at their trading strategies. What’s the point of analyzing the markets and sticking to a trade plan when the market moves randomly anyway, right?
The market environment may be constantly shifting and that’s the nature of the beast, but remember that consistent profitability can be attained by staying disciplined and following your tried-and-tested trading plan. If you are convinced that your current strategy is no longer appropriate, try conducting backtests or refining your approach instead of giving in to frustration and dismissing it altogether.
Keep in mind that trading is a marathon and not a sprint. There will be times when you’ll find it hard to keep up with the market and that’s okay. Just remember to pace yourself, get your timing right, and focus on proper execution.