Whether you plan on trading stocks, Forex or commodities, you are going to face emotional and psychological demons. Watching traders overcome these trading challenges is both inspiring and exciting! Unfortunately, many traders don't overcome them, even with the best trading strategies. What's worse is that they continually fall into the same emotional mistakes and fail at the same psychological obstacles. It's true that developing emotional discipline and learning how to manage your trading emotions takes time.

Many traders have had plenty of time though and are still falling short of reaching the land of profitable trading Many traders will let fear, greed, boredom or impatience beat them every time. Many Forex traders are stuck in an emotional cycle, which I call 'The Losers Cycle'. The cycle is like this Step 1. Find, create or learn a trading strategy. Step 2. Trade the strategy. Step 3. Become emotional. Step 4. Give up. Step 5. Go back to step 1 and repeat.

Almost all losing traders are in this cycle. They are the strategy hoppers. They are the ones that blame the strategy or the broker for their constant losses and blown trading accounts. They are the traders that fail over and over again because they constantly become victim of their own emotions - they ruin it for themselves! If they had an edge, it is gone due to their lack of emotional discipline. But, guess what? There is hope! These people can change.

They can become successful. If you are stuck in an emotional trading cycle, then keep reading So far I have covered the what, why and how of trading psychology and trading emotion. Time for the main show How do we control our Forex trading emotions and - in the process - become successful The first thing to mention is that there is no key to entirely eliminating trading emotions.

They are part of you and will always be around - even after 10 years of trading I still face negative emotions when trading! The key is to reduce the intensity of these emotions and to do your best to manage them.

Below are my tips on reducing trading emotions Reduce your trading capital - there is an undeniable emotional attachment to money, especially when it comes to trading. This emotional attachment intensifies if you are trading with more money than you are comfortable losing or if you are trading with money that you cannot afford to lose. Why put yourself through so much pain? Simply just reduce your trading capital to the point that you feel more comfortable and actually start enjoying trading again.

If you are not enjoying trading, then why do it?! If you are not willing to reduce your trading capital, I suggest you ask yourself why. You may find that you are being emotional and not thinking logically! Ask yourself, 'if I were to lose my trading account today, how would I feel? If the answer is emotional, then you are simply trading with too much capital. Reduce your position sizing - risking too much per trade is another way to crank up those trading emotions.

A single trade or a series of trades should never be make or break. Risking anywhere between 0. Generally, when someone is risking too much per trade, they end-up glued to their charts and worried about the outcome of the position. If this is you, then reduce your position sizing! Reducing your trading capital and position sizing will really help reduce stress and other negative trading emotions.

Focus on percentage returns, rather than monetary gain - as already mentioned, there is an undeniable emotional attachment to money. Because of this, it's so much better to focus on your percentage return than monetary return.

Looking at performance by percentage is also much more professional and will help you gauge how much you will need to actually make a decent income through trading. The latter tells nothing. Stick with the strategy and don't expect to make money - too many traders value their success by the amount of money they have made.

Once again, focusing on the cash side of things leads to more intense emotions. Instead of focusing on the money side of trading, focus on your strategy - the thing that gives you an edge. Your success should be valued in your ability to stick with your trading strategy, not how much money you make or lose.

Funnily enough, sticking to your strategy will lead to greater monetary returns. So if you really want to make trading work for you, then put your energy into following your strategy rather than the money you are making.

Think longer-term - this is a BIG one How often do you check your account balance? How often do you review your performance?

Most unsuccessful traders check these things on a daily basis. This mindset is totally wrong and extremely unprofessional. Profitable traders focus on the long-term. They are interested in their performance on a quarterly and yearly basis - not daily or weekly. Do yourself a big favour. Ease the pressure on yourself by trying to be profitable this year, not this week! Make trading a money making hobby or 2nd income - another way to reduce trading pressure is to make trading a hobby or a small 2nd income.

Trying to trade for a living adds unnecessary pressure and emotion to newer traders. It is a sure way to make trading become stressful. Keep busy - staring at the charts is both a waste of time and an emotional roller coaster. It might be a novelty at first but you will soon realise that it will increase your trading emotions, especially if you have open positions. I keep myself very busy throughout the day; running love-the-pips, being a technical analyst for a Forex broker, writing blog posts, playing video games, watching YouTube, etc.

These things keep my mind occupied and distracted from the charts and my floating profit and loss. Be committed to your analysis and trading strategies but let yourself become distracted with other things once trades are open.

Give time to the things that give you an edge, don't give your time to emotional activities. Consider longer-term trading - day trading is far more emotional than swing trading.

This doesn't mean that you shouldn't day trade, it just means that you are making trading psychologically harder for yourself. I personally believe that all new traders should become profitable swing traders before moving into day trading. Just my opinion. Learn from a professional - here comes the sales pitch Obviously it is much more beneficial learning from someone who knows what they are doing, rather than trying to teach yourself.

You can save yourself a ton of losing trades, heartache, and time, by simply learning from a trader than can point you in the right direction. Consider what you have learned in this post and how much you could learn by having your own trading coach or mentor. You can subscribe to my mentor program here. A cheaper option is my Advanced Price Action course, which covers my trading strategies and content on trading psychology.

You can sign-up here. One of the biggest ways you can reduce your trading emotions is to change your expectations As mentioned earlier in this post, expectation can be the root of your psychological challenges. In fact, if you think about it, you may realise that all your trading emotions are based on having false or unrealistic expectations. What do you expect from Forex trading? If you are expecting too much, you are always going to be emotional in your trading, as you are trying to reach impossible goals and aspirations.

Let me give you some examples A trader expects to double his account each month. Because of this, his position sizing is far too large, causing his trading to become very emotional. Because of this, when the win rate is not reached and he is having far more losing trades than expected, he becomes emotional in his trading.

A trader doesn't expect to have consecutive losing traders. He has consecutive losing trades and becomes emotional.

A trader expects this month to be profitable. The month is nearly over and he is not showing a profit. He becomes emotional. Hopefully these examples are good enough for you to clearly see that at the start of each emotional journey is expectation. Eye opening? Time for some hard realities about Forex trading You will have consecutive losing trades. You will have lot's of losing days and weeks. You will even have losing months.

Having more realistic trading expectations can significantly reduce the challenges of trading psychology. If I can help you master your trading emotions and - in the process - make trading more profitable and less stressful, then my content has not been in vain I really hope that this post has helped you so far.

Perhaps the quotes below will help you further Yvan Byeajee, Paradigm Shift: How to cultivate equanimity in the face of market uncertainty. Let this be a reminder for you not to obsess over profits and losses. In whatever you do, strive for enjoyment, focus, contentment, humility, openness Paradoxically and as an unintended consequence your trading performance will improve significantly ".

Yvan Byeajee, The essence of trading psychology in one skill. It takes so much pressure off you" Martin Niemi. Thank you so much for reading this post. You can watch and listen to the trading psychology podcast below to learn more. Unfortunately, it is also usually the cause of the crash and depreciation that soon follows.

Many traders have lost it all after greed overcame their rational trading senses. Fear of loss is what motivates many Forex traders to "jump ship" when things look rough. When a country goes to war, elects a different political party, or announces that one of their flagship corporations will be moving overseas, the result is usually a drop in currency value, as traders move their assets into a currency that will provide a more stable guarantee for their money.

If a currency is undervalued, why do any traders hold any of the lesser currency at all? The simple answer can be summed up in a single word: hope. Hope in the prosperity and adversity of a people can sometimes result in massive benefits. Take South Korea as an example; for decades, the country was considered to be third-world, poverty stricken by years of war with their neighbor to the north. During this time, the Korean won was basically worthless. However, in the 80's, South Korea underwent a massive overhaul, with high-tech corporations like Samsung and Hyundai shooting the country into the first world economic sphere.

Those who held their faith in the Korean people and refused to sell their won during the low point of the Korean War became billionaires virtually overnight. While many traders will tell you to separate your emotion from your trading as much as possible, it is nearly impossible to move all three of these common emotions out of the sphere of Forex trading. So, what moves the Forex market?

In a word, psychology. Japanese German Czech Spanish Polish Indonesian Greek Malay Hungarian Dutch Russian Arabic Italian.

by Andrew McGuinness Jul 16, Forex trading offers a vast number of opportunities that are diverse both in their initial investment strategy and their potential for capital gain. Like investors in any sort of market, investors involved in Forex trading want to know what drives the market, what makes it move, and how they can best profit using their knowledge of different currencies and cultures.

While those involved in stock trading can grab a quick glance of the corporation they're choosing to invest in at a moment's notice via government data and corporate reports, those investing in Forex trading have a bit of a larger challenge ahead of them.

There are a seemingly endless number of factors that contribute to the value of a currency and its fluctuations because when you purchase into a specific nation's currency, you are banking on the potential and power of their citizens. You can tell a lot about a country's economic picture by grabbing a simple comparison graph or chart looking at the value over time of their currency when compared to the "big four" currencies that are considered most valuable in the world: the United States dollar, the British pound, the Euro used by the European Union, and the Japanese yen.

Because Forex trading involves investing in the potential of people, emotions also run especially high on the Forex market. The three emotions that control how the Forex trading system works are:. The green-eyed monster can cause even the most experienced on technical traders to ignore the signs that a currency will soon crash and attempt to jump on a growing hype. Greed usually causes a flush of currency value when a certain currency pair is doing particularly well.

Unfortunately, it is also usually the cause of the crash and depreciation that soon follows. Many traders have lost it all after greed overcame their rational trading senses. Fear of loss is what motivates many Forex traders to "jump ship" when things look rough. When a country goes to war, elects a different political party, or announces that one of their flagship corporations will be moving overseas, the result is usually a drop in currency value, as traders move their assets into a currency that will provide a more stable guarantee for their money.

If a currency is undervalued, why do any traders hold any of the lesser currency at all? The simple answer can be summed up in a single word: hope. Hope in the prosperity and adversity of a people can sometimes result in massive benefits. Take South Korea as an example; for decades, the country was considered to be third-world, poverty stricken by years of war with their neighbor to the north.

During this time, the Korean won was basically worthless. However, in the 80's, South Korea underwent a massive overhaul, with high-tech corporations like Samsung and Hyundai shooting the country into the first world economic sphere. Those who held their faith in the Korean people and refused to sell their won during the low point of the Korean War became billionaires virtually overnight.

While many traders will tell you to separate your emotion from your trading as much as possible, it is nearly impossible to move all three of these common emotions out of the sphere of Forex trading. So, what moves the Forex market? In a word, psychology. Japanese German Czech Spanish Polish Indonesian Greek Malay Hungarian Dutch Russian Arabic Italian.

Sign up Log in. The Three Emotions that Move the Forex Market. The three emotions that control how the Forex trading system works are: Greed. Get unlimited access to our Learning Center, Broker Insights and Exclusive Promotions for Free! Open an account.

Another example of this fear is not letting positions run long enough. Please note - I think it's important to note here that there are positive trading emotions. You may find that you are being emotional and not thinking logically! He started his career in the financial markets and has traded and invested in stocks, options, forex, futures, crypto and real estate for over 20 years. If this is you, then reduce your position sizing!

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