How to Control Your Trading Emotions and Staying Focused

Trading is challenging enough without the extra baggage that comes from negative emotions. So, it is paramount that we not only try to neutralize the negative emotions during our trading, but in addition we should strive to develop positive emotions that will help build a winning mindset.

Developing Positive Emotions

Here are some positive emotions that you should work on that will help you improve your trading process:

• Think Positive – Every action begins with a thought. Think Positive and you will attract positive energy. This is the law of the universe. You must believe in yourself and in this tenet to build a positive trading psychology. Remember, the glass is always half full not half empty.

• Be Patient – Good things come to those who wait. This is especially true in trading. Do not chase a trade. Instead learn to sit back and let the trade come to you. And if you miss the trade, then so be it, but you will have the satisfaction of knowing you did the right thing. And that is what will pay off in the long run.

• Be Thankful – The market is making itself available to you to generate profits. Be thankful of that. Know that the market exists to facilitate trade for you. So regardless of a winning or losing trade, just be thankful of the opportunities that the market is providing for you daily.

• Feel Inspired – No doubt that trading is one of the toughest professions out there, but there is light at the end of the tunnel. Challenge yourself to tackling the market, regardless of how long it takes. You believe in yourself and your confidence in becoming a consistent trader.

• Be Passionate – Remember, if you love what you do, you will never work a day in your life. Be passionate about the market. Take in everything, not because you simply want to turn a profit, but because you truly love the markets and trading.

• Be Persistent – A string of losses is natural. It happens to world renown traders, and it will happen to you. A loss is nothing more than the cost of doing business. You either win on a trade, or learn a valuable lesson. Keep at it, and know there are no shortcuts. It takes a minimum of 10,000 hours to master any craft. Trading is no different.

• Visualize – Every morning you can train your mind. You should visualize the trading day, imagining the setups you will take and the process that you will follow in executing the trade. You go thru each stage of the trade in your mind and feel confident that you will calmly and methodically do the same during the live trading session.

Have a Trading Plan

There are countless reasons why you should have a trading plan, not least of which is because it will help you to stay better focused and disciplined. A good trading plan by its very nature helps to reduce the negative emotions associated with trading because it acts as a predefined guide or action plan for events both foreseen and unforeseen.

With a well-constructed trading plan, you will not be caught like a deer in the headlights, paralyzed to act. Instead you will know exactly what needs to be done regardless of market conditions.

So, what are some of the important questions that need to be answered within you trading plan？ Here are some questions that you should address:

• Which markets do you plan on trading？

• How will you define your risk on a trade？

• How will you define your position size？

• What is the maximum drawdown you can reasonably tolerate？

• How will you define success？

• What criteria will you use for entering and exiting a trade？

• Which trading timeframe will you focus on？

• Whats the max leverage you plan on using？

• How long do you plan on staying in a trade？

• How much money will you put into your account？

• How will you handle weekend exposure？

• How will you deal with correlated signals？

• How will you deal with a potential black swan event？

• What steps will you take to improve your trading psychology during a drawdown？

I would guess to venture that less than 5% of traders ever take time to put together a serious trading plan for themselves. But experienced traders know that it is an essential ingredient for success in the market.

Stick with your strategy

Many newbie forex traders are like nomads. They simply flock from one place to another. One week they are trading a Support and Resistance based strategy, another week they might be trading using Elliott wave, and yet another week they might be applying Gann based techniques or something else for that matter. This lack of discipline and focus is not only counterproductive but also results in unnecessary emotional ups and downs.

The point is that you need to fully dive in and learn a methodology that you feel comfortable with and one that suits your personality. Once you have found that, you need to learn as much as you can about it and start applying those trade techniques in the market. You should not bail out on it without giving it a proper go.

A proper go means taking and analyzing at least 100 trades. But bailing out too early on a trading strategy is exactly what most new traders tend to do. Many novice traders seem to be searching for some no loss holy grail system in the market which does not exist. This leads them down a road of unrealistic expectations and eventual letdown.

Successful traders find a strategy and stick with it. They know and accept that their strategy will have losses, sometimes even a string of uncomfortable losses. But at the end of the day, if they have back tested and stress tested their methodology over time, these traders know that their strategy has a defined edge, and their job is to execute the trades and simply let the odds play out over time.

Stay tuned as WikiFX will bring you with more Forex trading tips!

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