Dealing with Nerves in Forex Trading

It is a known fact that in forex trading the calmer you are, the less the chance of a rash decision and bad trading outcome. How can a forex trader deal with nerves when entering a trade and during the trade itself?

Below are some of the advices that can save you a lot of headache, nerves and sleepless nights. You cannot completely get rid of the nervousness, but at least you won’t feel paralyzed during forex trading.

Small Size Matters. In my experience, trading small amounts is a good start. This way without loosing much of your savings, it is possible to build up your trading confidence and competence. Starting with small size positions and adding bit by bit if your entry turns out profitable.

Place Stops. Another good tip for calmer forex experience is always placing a stop. It is wise to place the stop in the “safe area” where the rational cause of your trade is invalidated.

Demo Trade. I said it many times before and I will repeat myself for many times ahead. You have to build up your self esteem and belief in your forex strategy.  Once your confidence increases, you can actually focus on the outcome of the several numbers of trades, instead of obsessing about the outcome of one specific trade.

Risk Management. Calculate the maximum amount of money you are ready to risk on each trade. My advice, don’t go over 3% of your trading account balance. Follow your risk plan and figure out the stop levels based on where the trade might be considered a bad idea.  Adjust your position size according to the stop size.

Emotional Exercises. Keep trading pressure to a minimum and learn to handle it before moving on to larger trades. While starting small to keep the nerves at “approachable” level you still have to deal with emotions and their effect on your trading style. While acknowledging the emotions, learn to control your actions. Once you master the approach with small trades, you are more likely to succeed in controlling your emotions with bigger size trades.

Fight Against Fear and Hesitation. The two most deadly enemies of forex trader – fear and hesitation. You have to understand that forex trading is not about making money in the shortest time possible. Forex trading is about adopting and becoming profitable via keeping losses to a minimum while you learn. It is important not to let your ego strangle your judgment.

100% Plan. You have to plan your trades and design plan B - your actions if something unexpected happens. It sounds some what mechanical and no one can turn into a robot (over night!), therefore you should at least have an idea of what you are doing, why are you placing a specific trade and what is your escape plan in case things go wrong. Once you have a plan for most possible market moves, you remove some portion of emotions out of your forex trading experience.