Forex Trading Success Comes From Within
Mastering one’s emotions is the single most essential factor in determining whether or not you become a consistently successful Forex trader. This article will provide you with some useful insight into how you can start mastering your emotions and get on the track to successful Forex trading…
Successful forex trading depends upon a trader’s ability to consistently make decisions that are completely uninfluenced by emotion. When interacting with the market most traders become influenced by how they are feeling, it is overcoming this mistake of letting our feelings about the market influence our trading that fosters a successful trading mindset.
This article is going to give you an awareness of the biological similarities that we humans share which allow us to both commit emotional trading mistakes as well as overcome them with the proper training and information. Without down-playing the significance of the psychological difficulties that are an inherent aspect of forex trading, we are going to provide you with some concrete insight into why all of us have the potential to become successful forex traders by explaining the commonality of our brain functioning, as well as some tips on how you can attain this seemingly elusive trading success.
Battle of the Brains
In the world of evolutionary biological psychology, it is a well known fact that the frontal lobe of our brain is the newest area of the brain and also the part that is responsible for giving us the ability of complex reason and planning. Our older brain structures that evolved to serve us well in the era of early human existence are essentially designed for fight or flight functions, which served us very well for thousands of years, and still do for some aspects of modern day life. However, it is also these same fight or flight brain structures that give us problems while trading the markets.
The reason our fight or flight brain structures cause us problems while trading is because they induce emotion-based, or feeling-based trading. The issue here is that it is nearly impossible to think objectively and logically when your body is primed for action, your adrenaline is pumping and you are in fight or flight mode. When we have money on the line in a trade, it is a very delicate situation that can easily lead our fight or flight brain to flare up, and essentially over-ride our frontal lobe intellect and reasoning. Our older brain structures and nervous system are wired to work in such a way that they can override the objective and deeper thinking parts of our brain in case we get into danger and literally don’t have time to “think”. For example, if you accidentally put your hand on a stove burner that you mistakenly thought was turned off, you aren’t going to stop and think about what you are doing, you are instantly going to pull your hand away and probably scream without even thinking about it.
As Forex traders, we need to be aware of these basic concepts of how our brains work because once we get into the cycle of emotional or “fight or flight” trading, there is really no escape until you lose all or most of your money and “snap” out of the emotional trading cycle.
Trading success is about mind and emotional control
Traders are often told they need to control their emotions to achieve success. While this is well and fine, most people that preach this gospel never really tell traders HOW to do this. Different situations require different techniques for controlling one’s emotions. Since trading involves having your money on the line and it possibly going up and down, for and against you, before the trade ultimately plays out, it is critical that you not allow yourself to be influenced by this natural ebb and flow of market movement once you enter you trade. Even IF you manage your risk extremely consistently and only risk a tiny portion of your account on each trade, if you sit there and watch your trade play out after you have executed it, you are probably going to induce your “old” brain and begin to feel emotion.
This is why you need to plan your trades thoroughly before entering them, leave no stone unturned, cover all your bases prior to putting your money on the line, and then let the trade play out with minimal involvement. The primary way to avoid trading with the “old” more primitive fight or flight brain structures, and make sure that you trade with the “new” objective thinking frontal lobe part of the brain, is to make 100% certain you plan out your trade before you enter it.
You essentially have to “outsmart” your own brain by realizing and accepting the fact that you will never be MORE objective and logical than when you are NOT in a trade, therefore this is the BEST time to plan your trade out. Staying in this objective mindset as much and as long as possible is what makes a trader consistently profitable. Since your trading accuracy directly depends on your ability to remain objective when making forex trading decisions, and objectivity is a function of planning your trades before entering them and NOT looking at them for hours on end as they unfold, it goes to reason that there is an inverse correlation between time spent looking at the markets and trading success. Meaning, assuming a certain basic level of Forex trading knowledge, spending increasing amounts of time beyond this level, either analyzing market variables or watching your trades play out, will cause you to lose money over time.
Simple vs. Complex Trading
Above and beyond planning your trades before you enter them and not meddling with them after wards, the next biggest contribution to remaining objective and thinking with your more advanced frontal lobe while trading is to use a simple trading method. Many Forex traders do themselves a huge disservice by trying to use overly complicated trading systems that cloud up their charts with lagging indicators or trading software programs. Once you start to become confused or frustrated with your trading method you greatly increase the probability of trading emotionally and becoming less objective, and thus losing money. It is critical that as Forex traders we do everything within our power to think clearly while making trading decisions and not elicit our fight or flight brain structures.
The best method to maintain such simplicity and clarity while trading is price action. When we use simple price action setups to trade the market we are giving ourselves a much greater chance at remaining objective and calm and thus, profitable. Choosing to learn how to use price action setups on a simple plain vanilla price chart is a decision that you can make which will greatly increase the likelihood of you not falling into the trap of emotional trading mistakes. The other aspect is that you learn to “set and forget” your trades, which means you plan them out before entering them and do not attempt to unnecessarily meddle with them afterwards. We all have the ability to make these decisions, this is the good part, it is up to you whether or not you choose to make them, and apparently most traders don’t. So the first thing you can do to set yourself apart from the crowd of losing traders is to secure an education in a simple yet effective trading method like price action, to learn more, checkout my price action trading course.
30 Comments Leave a Comment
Thanks Nial, your articals are a blessing, they are greatly improving me how to trade.
Strong article! Thanks
“If there is no enemy within, the enemy outside can do us no harm” –African Proverb
Hello Mr. Fuller
Along the same line as your article, but can give even greater depth to what you say is a book called “Handbook to higher consciousness” written by Ken Keys. The techniques in the book can help emotionally and psychologically. Good article.
I love this article. Am yearning for more. Thanks alot
I find this article very helpfull & i completly agree , Thanks for helping , & keep it up , best regards .
Hi Nial, it is a great article!
When first bumped to your site it was a wonder for me to believe how could an active trader spent time writing, preparing videos and conduct online course and entertain his members beside daily family life.
I replayed your videos many times over months and finally verified the truthful of your strategy especially “set an forget”.
Appreciate every posting and video you made. Thanks alot!
Thanks.It’s great.I will join your community soon
Well said Nial.
Great artical Nial, Yes very important this emotional stuff it can really f*** up your trades…
Thank you for this Nial you have explained exactly what I have been doing wrong and the steps i need to take to get me on track and not lose anymore money
Awesome mate, definitely the area I’m struggling in, fear and doubt, scared of losing too much capital. Being 100% certain of your trade plan, before entering the trade is very true, and overlooked by many, including myself. So once again nials thanks so much.
HOW to control emotions is an ongoing study for me, so thanks for starting this topic. You can’t take control by playing tough guy and stomping on the feeling. Here’s a trick that works really well and gets better with practice.
Next time you feel a strong emotion, don’t resist it, just acknowledge it. Stop what you’re doing and say “Hey, that’s not who I really am.” (If it were, it would stay around all the time.) Then release it. You do that by letting it hang around until it’s done, then saying goodbye to it. After you do this a couple of times, you’ll probably notice that if you just allow it to be there, it’ll lose interest pretty quickly, kind of like a kid having a tantrum, while you’re just waiting patiently until it’s over. You probably know how to do that if you have kids.
Try it a few times, not just once, before you decide whether it works for you or not.
What if during the trade you feel you made a mistake, do you get out? Cut your losses short or let it ride?
Razor sharp insightful valid reasoning from an acute mind.
Exemplary again Niall your guidance continues to encourage my desire to trade Forex successfully for my living, thank you.
Verwy much good story Nial
This is a very important article so we really need to try to wrap our brains around it – no sarcasm intended. By simply back-testing using strategies such as price action, it’s apparent that if you had followed the protocol of price action, you would have been successful a majority of the time.
It’s our primitive brain that “reacts” when the market starts to move against us. We reason that if we pull out now, we can save 50% of our trading capital per that trade. But again, if you go back to that particular trade a few weeks later, you will see 9 times out of 10 that the trade would have gone in your favor had you had the resolve to stay in it.
This is an ongoing saga for me.
Thanks Nial. To date that has been my biggest problem. Intefering with my trades and moving my stops. Even today I got two breakeven trades when I could have gotten 150 pips if I had just set and forget the trades and not move my stops.
Thank you, Nial.emotions must learn to restrain.
An excellent article to promote discipline and self-control. It is difficult to Not let emotions rise when entering a trade. Solid preparation can help bring about objectivity. Price action keeps the process simple with great clarity. Just ordered my course and am eager to learn and interact with the community.
You are one of the best PA guys in the business. Thankyou for dealing with the important mental aspects.
Great artical Nial,
Another nugget of knowledge Nial! Price action is truly the best and simplest way to trade the market period!
Thanks Nial for another great article. It is always good to hear from you and learn something.
Every one first to learn about our capacity controling our emotion and then enter the forex trading
Very interesting. Now I understand why so many people succeed on demo account and fail on live.
Thank you, Nial.
Nial – excellent article on an aspect often struggled with by traders.
nice article. keep doing good job.BW
Great- A BIG THANK YOU