Overcoming the Fear Factor of Forex Trading

While we refer to trade markets as investments, it is only to disguise the fact that our investments are really a gamble.  No matter how much research you do or how skilled you are in Forex trading, there is always still a risk that you could lose it all.  For many people, this gamble is what makes Forex trading so much of a thrill – but the fear that comes with risky behavior can cause you to make bad decisions.  If you want to be successful in Forex trading, you must be able to separate your fear from your actions.

Never Invest more than you can afford to lose

The first rule of Forex trading is to never invest more than you can afford to lose.  By following this rule, you won’t be too fearful that your investment will tank.  You are also much more likely to follow out your plan of action, such as not selling immediately when a retracement occurs so you can ride it to the likely upward swing.  Never invest the last of your utility money because you don’t have to pay the mortgage.  You will be so caught up in the urgency of the situation that your fear will lead to you make poor decisions.

When you start Forex trading, you should always expect some losses while still aiming for profits.  If you pre-calculate a certain amount of loss, it won’t be so devastating when it happens and your future decisions are less likely to be driven by a desire to recoup the losses.

Never put too much risk into one investment

No trader should ever put too much risk into one investment.  This is a recipe for disaster because you could lose a substantial amount of your account with one bad decision.  5% is a generally accepted reasonable amount of your account to put into one investment.  At this amount, you aren’t going to get as anxious if the market suddenly has a downturn.  You will be better equipped to step back and look at the downturn reasonably to decide whether it is a slight hiccup which will right itself or a reversal which merits you selling the currency off to minimize your losses.

Trade with an Enter and an Exit plan

Having a set enter and exit plan is key to getting rid of the fear associated with Forex trading risks.  Ideally, you should be following and studying the investment for weeks before you put any money into it.  Beforehand, you should have decided at what point you will buy – such as when the currency gets at 50% of a Fibonacci sequence you calculated. Always set a stop-loss order AND also an exit order.

Educate yourself

The best way to get rid of Forex trading fears is to educate yourself.  Education is not a quick process!  You will need to spend a lot of time reading articles, testing out different strategies with demo Forex accounts, paying for professional live help, combing the forums for tips, and also a lot of trial and error.

Learn from your mistakes

Most importantly, never beat yourself up too much over a loss.  Even the most skilled Forex traders experience losses.  What is important is that you analyze why these losses occurred and what you could have done differently.  The best way to learn is through mistakes. Don’t forget to also analyze your successes to see why they worked so well and if there are any things you would have done differently to increase your profits. After many losses while Forex trading, hopefully, your profits will outweigh the losses and you won’t be so worried about each individual trade anymore.