How to keep your emotions under control and cope with the stress of Forex trading
It’s safe to say that every job has a certain level of stress associated with it, but jobs in finance are generally perceived as some of the most stressful out there because they involve handling money. So, what about Forex trading, which is influenced by the volatility of the market and where something unexpected can happen any minute?
Just like the stock market, the Forex market can be unpredictable. Thorough research can mitigate part of this unpredictability, of course, but, overall, being a Forex trading isn’t for people who love routine and staying in their comfort zone. Whether you work full time as a Forex trader or you just trade from time to time as a way to consolidate your long-term savings, it’s important to learn to cope with stress and keep your emotions in check.
How stressful is it to be a Forex trader really?
It depends on who you ask, but most people who work in trading say that this field is nowhere near as stressful as the movies make it seem. In fact, both Forex and the stock market have a reputation for keeping traders at their desks for 18 hours a day and forcing them to give up their health and personal life. At the highest level, that can be true, but the average trader doesn’t have to deal with an unhealthy amount of stress. There are people who trade from nine to five and then come back to their families without feeling exhausted, and people who trade only occasionally using their smartphones.
If you like the idea of going into Forex trading, but you’re afraid that it’s too stressful for you, give it a go. There are so many misconceptions about it that you can’t really know until you try it!
However, if you’ve been a Forex trader for a while now, and sometimes you’re a bit overwhelmed by the quick rhythm of it all, these tips can help you stay ahead of the game.
Research is the best way to be in control
Unlike the people who were trading before the 2000s, you have an extra advantage: information. Thanks to the Internet, Forex insights are no longer reserved to high-ranking finance executives. You can get all your Forex education online, read books written by the world’s most affluent traders, join Forex forums where you can discuss news and trends and even find a mentor who can walk you through the biggest challenges of Forex trading.
Think of trading as a tough exam. It’s normal to be a bit nervous at first, but the more you study and do your homework, the more confident you will feel.
Although trading can be risky, having a solid strategy and basing every move on deep research will help you manage your emotions and prevent you from taking rash decisions. No matter if you trade for work or as a hobby, take the time to familiarize yourself with the charting tools and techniques of professionals and understand the general direction of the market. This way, even if you may suffer some small losses, the overall result will be positive.
Forex beginners tend to be more risk-averse and stick with safe trading strategies. However, the more you trade, the more you want to win big. For example, people who have been in this game for years often choose brokers with high leverage. These are a great choice when you want to trade high volumes with low margins and generate quick profit, but they’re also very risky. Using this strategy repeatedly can give you some very high highs and some really low lows, so be careful when and how you rely on risky methods. When each and every one of your trades is high-risk, stress will undoubtedly affect you. To avoid stress from taking over, understand the biggest Forex risks and how to manage them.
Harness the positive power of stress
For many people, stress is a debilitating feeling that stops them from thinking logically and forces them to take rash decisions. In Forex, a bad decision taken in the heat of the moment can have devastating effects, but did you know that you can program your brain to use stress as a positive force?
Psychologists differentiate between two types of stress: eustress and distress. Distress is chronical and emotionally draining because you feel like you lost control, while eustress is the kind of stress that makes you perceive a negative situation as a challenge, not as a threat. This type of “good stress” keeps you motivated to push your goals and get better. Once you understand that there are things you can control in Forex trading, but loss is an inevitable part of the job, you will no longer feel overwhelmed by anxiety and instead, you’ll welcome every challenge with excitement.
Understand your response to stress
Forex trading has an important psychological element to it. In this industry, knowing yourself and your reactions is just as important as knowing your market. As long as you’re not confident in your trading abilities and don’t know how to control your impulses, every loss will deliver a great blow.
Practicing is essential if you want to boost your self-confidence, which is why you should never start trading until you’ve made a demo account. Made possible thanks to online platforms, demo account work in the same way as the real thing, but neither the wins nor the losses are real. They’re as close as you can get to replicating the feeling of Forex trading and you can use them to understand your psychological response to stress. Through deliberate practice, you can analyze your reactions when losing and learn to suppress the destructive instincts that lead to anxiety. This way, you’ll get used to the high-intensity rhythm of Forex trading and avoid freezing when something unexpected happens.