How to Cope With Fear When Trading in Forex

As a currency trader, probably more so than in many other professions, you will experience many emotions, and be presented with the opportunity to get to know yourself. Forex trading enables a trader to get to know every aspect of his personality, including his greed, patience, anger and fear. The most common fear that a trader will experience is the fear of losing his or her money. This is the is Number 1 emotion experienced in trading. Everyone who comes to a Forex market will need to master this emotion.

A fear is an emotion in which there is a perceived danger, in response to which we have developed protection mechanisms and a survival instinct. The so-called “fight or flight” instinct, which is also common to many animals.

Which fears can appear when trading in Forex?

A Forex trader may face many types of fear:

1. A fear before opening the order (fear of the unknown): This fear appears when you have had an unsuccessful experience in Forex, in which you made some losses and are afraid to make a mistake again.

2. A fear to lose a possible profit or a profit that you already have: This fear arises when you see the chance to make a profit, but are afraid that the opportunity will pass you by. It usually happens when you see that a price is steadily rising, and you have a strong desire to catch this train. You begin to hurry and enter the market when it is too late. Similar things can happen with the profit that you have already made. When you already have some profit and see that the market turned back, you start to worry because your profit is melting away. You close your order to minimize your potential losses. As often happens, as soon as you close a position, the market turns back again and goes under the previous forecast.

3. A fear of losing a deposit: This is a fear of complete bad luck and is probably the biggest fear a trader will have to face. It is something he or she will have to work to overcome and turn into a healthy, positive emotion Think of it as being like seat belts in a car. It is there to protect you from potential harm.

The types of fears described above are often experienced by newcomers and inexperienced traders. Such fears commonly arise at the moment of making a trade. If those emotions are not properly controlled, they will always cause you to make losses. However, it is important to say that fear is a healthy emotion. As a famous trader from the past, William Delbert Gann, observed: “If you got mistaken, fear will rescue you if you are going to act quickly.”

While the fears described above are most commonly experienced by newcomers some professional traders state that for them, fear is more than only flair, it is “the sixth sense” according to which they timely get out of a position. There are situations when an order reaches neither Stop loss nor Take profit, however, the trader senses that “something is wrong”. Some other experienced traders do not experience fear in general as, eventually, trading becomes a routine job that does not give rise to any emotions. When they lose, or they earn 100 points, their emotional condition remains the same.

If you wish to reach success in Forex trading, it is not enough to only have a profitable trading strategy, as well as the necessary instruments. It is also important to have a “correctly determined brain”, and the right psychological status. Those things can be reached only when we learn how to control our emotional reactions to changes in the market.

Many people do not have the opportunity to find out how they would behave, or react, and which emotions could appear when they begin trading in Forex. Such people might not have the slightest understanding of their emotions, but their reaction to them is of great importance to a successful outcome to their trading.

5 practical methods to reduce fear

Here are five methods, which have been tested in practice, to get rid you of your fear:

1. To reduce the significance of the result: A fear arises because a lot of us give prominence to the end result, i.e. money. For example, let’s say, you were trading and lost $300 a day. You immediately start thinking how significant that money is to you. You are thinking about what you could buy with the money you have lost. Imagine, now, that you earn $1000 a day! You become euphoric. A pattern of thought starts to control you and you think about all nice things you could buy with that money. A result is prominent in both ways, and it should not happen. Trading must be easy and without emotions, in the same way, that you brush your teeth or wash the floor. Try not to look at the place, or cover it, where your profit or loss is written, and you will see how easy it will become for you not to give prominence to the end result.

2. Fear-awareness: In other words, getting to know your fear. You have to get to know your fear; to look at it from the side and ask yourself: “which fears, if any, do you actually have?” Is it the fear of losing your money? Or, perhaps, the fear of losing a profit that you already made? Does your fear mean that you must close the unprofitable position? As soon as you answer questions such as these, you will see that many of your perceived problems disappear, and you will get rid of 50 % of your fears.

3. A method to how to “wedge a punch with a wedge”: By this, I mean that if you wish to get rid of fear, it is essential that you practice the thing that causes the fear. That means it is necessary to make so many trades until it becomes commonplace. It is when you have developed a trading routine that you will realize that you have overcome your fears.

4. “A token” method: Have you ever thought about why people play with tokens and not in cash in a casino? Casino chips are designed so that the players do not to think about the consequences or the money when he or she is gambling. If money was built on cards (stacks of bills), may of casino players be afraid to risk gambling so much money. A gambling with a pile of chips does not give rise the same fears. Therefore, when we apply the token method in Forex, it is necessary to consider your result as whole (positively and negatively), not in dollars or euros, but in points (pips). For example, say that today I have earned 50 points (pips) or have lost not 150 dollars, but 30 points (pips). Do not count money in your mind, count points instead.

5. Minimization method: This method teaches us to get used to money, which can be earned or lost. Let’s say we open the order with 1 lot size, and our 10 points stop-loss was achieved. We are going to lose $10. Such a small loss will not cause any emotions for many people, but if the size of that lot was 1 and 10 points stop loss is achieved, then the loss would be $100 dollars. That, for someone people, could cause stress because that some of money is very important to them. How should we use this method? Start trading from the smallest size of 0.01 lot orders and eventually increase it. Increase it gradually, until you feel that the sums being traded cause you no more fear.

I wish you good luck. Overcoming your fear is possible like in this video 🙂