Learn Forex – Reducing Stress for Day Traders

Good morning traders. Today's post has nothing to do directly with technical trading, but it might help you with reducing your stress levels while you are in trades.



A year or so ago I was involved with a forex signal service. We provided live forex signals to a subscription membership base of primarily small retail traders. The site also featured a live chat room, where all the member traders could chat amongst themselves during the trading day.

As an observer, one thing that was not difficult to miss was the stress levels of the traders while actually in the trades. Chat volumes would increase dramatically, the validity of the signals (especially if the market did not start progressing within minutes of entry) would begin to be questioned, etc. Some of the traders would actually be closing their positions within a short period of time, only to watch the market begin moving in the direction of the trade a few minutes later.

Then the chat would REALLY pick up as they watched their mates making money while they themselves were sidelined.

Our trades were planned primarily on the hourly and 30 minute charts, with entries fine tuned on the 15 minute charts. Almost straight after the trades were entered, traders would drop to the 5 minute charts (or even 1 minute charts) and then they would live or die by each movement of each candle.

Have you ever noticed that it is always easier to find reasons to be getting out of a trade, than it is too find reasons to stay in the trade ?

Why ?

Simple ... FEAR.

You may have heard by now that the forex market is driven by two emotions - FEAR and GREED.

In our chat room the dominant emotion was FEAR.

 
Two common reasons why fear dominates the mentality of the smaller day trader.

--> Undercapitalised Trading Accounts

Its a fact that many day traders are in the game because they have heard that it is the holy grail for FAST MONEY. They have a few hundred dollars (in some cases its almost their last few hundred dollars) and they are looking to make a quick living from this.

Scared money will never win.

If you do not have the money to lose then forex trading is NOT the business for you. You will NOT win every trade. You will take losses.

If you cannot afford to take those losses then FEAR will be your dominant emotion ... and with FEAR comes the STRESS, and more losses.

--> Having NO Plan

If you have not got yourself a plan for your trades - both an entry plan and an exit plan - and you are trading "by the seat of your pants" whenever you FEEL the market is going to go your way .... THEN YOU WILL LOSE.

Its that simple.

Having no plan will result in additional stress levels, as you jump into a trade and then watch the market do exactly the opposite of what you "felt" it was going to do.

 
In Conclusion

Lets bring this all together.

As a small day trader, if you wish to reduce your stress levels while trading then -

  • Make sure that you have enough money in your trading account to be able to take a string of losses without worrying too much about it. Losing streaks happen to even the most talented of traders.
     
  • Trade within your limits. Your stops HAVE to be placed in certain locations. Do not take trades where you cannot afford to place your stop properly.
     
  • Make sure that you have a trading plan.
     
  • Remember that stress comes from a lack of confidence. Trade with confidence.

In the forex market you are usually considered to be "in a position" if you are either short or you are long. I have always considered "sidelined" to also be a valid position as well.

It is always less stressful to be sidelined and wishing you were in a trade, than being in a trade and wishing you were on the sidelines.

Never stop educating yourself. Thank you for stopping by and taking the time to read this article. I wish you good trading.