The profession of a trader can add a whole wagonload of extra emotions and experiences to your life. Fear, along with other important emotions, hope and greed, drive the forex market. Because of the fear of losing money that affects everyone involved in forex trading, fear can be called the number one emotion in trading.
Generally speaking, the emotion of fear arose as a result of a perceived threat and has evolved into a natural defense mechanism in most animals. In our heads, the limbic system is responsible for fear, which is one of the most primitive parts of the brain. Fear is one of the components of the instinct of self-preservation in developed animals and manifests itself in the form of "fight or flight”. It is the same with humans.
Response of forex traders to the fear manifestation
When trading, there are several types of emotional responses associated with fear:
- Fear of failure
- Fear of missing potential profit
- Fear of losing everything; doom.
The aforementioned fear-related emotions are reflected in the daily movement of the markets and often lead to trading losses if not properly controlled.
Nevertheless, fear can be extremely helpful in case of market contingencies. As W.D. Gunn, one of the famous traders of the past, remarked, "Fear will save you if you act quickly when you realize you have made a mistake."
Many professional traders admit to using fear as a sort of sixth sense to get out of a position in time. This refers to situations where neither take-profit nor stop-loss has been triggered yet, but the trader feels that "Something is wrong." Another quote by Gunn reflects the above well: "Fear of the market is the beginning of the road to wisdom.
How fear drives your trading
Having a good trading system and all the necessary technical and analytical tools is not enough to succeed in forex trading. You also need the right mental attitude. Which can only be achieved by learning to control your emotional reactions in all possible trading situations.
Most people have no way of knowing how they will react or what emotions they will display when they start trading. And they have no idea how much their emotional reactions will affect their profitability.
Another emotional reaction that can negatively affect a forex trader includes fear, preventing them from doing anything, namely opening/closing positions. This can be especially detrimental if the trader, holding a losing position, finds himself paralyzed, unable to close a losing order while the market continues to move against him.
This type of reaction can also prevent the trader from opening a position when he hesitates to "pull the trigger" and thus goes against his own trading plan and system rules.
Another type of fear, which occurs during forex trading, usually occurs after the trader has closed a losing trade. Due to the loss of confidence in their system caused by a previous losing position, the forex trader may be too scared to re-enter the market, even fully aware of the possibility of recovering the money lost on a previous trade.
How to use fear in forex trading
Basically, when it comes to fear, keep in mind that fear refers almost exclusively to future events. It can take the form of prolonging an unacceptable situation (holding on to losing orders), which can make the current situation even worse.
A good way to deal constructively with fear is to replace it with hope which can be very damaging to the trader. For example, instead of thinking, "I hope the market comes back," you can replace this thought with a much more helpful "I'm afraid I'll lose more money. Caution in trading can't hurt. This thought replacement technique can help well if you find it morally difficult to accept (and close) losing trades.
In general, if you can be disciplined and trade using a good strategy, with application and unquestioning adherence to a money management system, fear and other emotions can be easily curbed. As long as you "plan your trade and trade plan," fear can usually be kept to a minimum in your forex trading.
Generally speaking, the emotion of fear arose as a result of a perceived threat and has evolved into a natural defense mechanism in most animals. In our heads, the limbic system is responsible for fear, which is one of the most primitive parts of the brain. Fear is one of the components of the instinct of self-preservation in developed animals and manifests itself in the form of "fight or flight”. It is the same with humans.
Response of forex traders to the fear manifestation
When trading, there are several types of emotional responses associated with fear:
- Fear of failure
- Fear of missing potential profit
- Fear of losing everything; doom.
The aforementioned fear-related emotions are reflected in the daily movement of the markets and often lead to trading losses if not properly controlled.
Nevertheless, fear can be extremely helpful in case of market contingencies. As W.D. Gunn, one of the famous traders of the past, remarked, "Fear will save you if you act quickly when you realize you have made a mistake."
Many professional traders admit to using fear as a sort of sixth sense to get out of a position in time. This refers to situations where neither take-profit nor stop-loss has been triggered yet, but the trader feels that "Something is wrong." Another quote by Gunn reflects the above well: "Fear of the market is the beginning of the road to wisdom.
How fear drives your trading
Having a good trading system and all the necessary technical and analytical tools is not enough to succeed in forex trading. You also need the right mental attitude. Which can only be achieved by learning to control your emotional reactions in all possible trading situations.
Most people have no way of knowing how they will react or what emotions they will display when they start trading. And they have no idea how much their emotional reactions will affect their profitability.
Another emotional reaction that can negatively affect a forex trader includes fear, preventing them from doing anything, namely opening/closing positions. This can be especially detrimental if the trader, holding a losing position, finds himself paralyzed, unable to close a losing order while the market continues to move against him.
This type of reaction can also prevent the trader from opening a position when he hesitates to "pull the trigger" and thus goes against his own trading plan and system rules.
Another type of fear, which occurs during forex trading, usually occurs after the trader has closed a losing trade. Due to the loss of confidence in their system caused by a previous losing position, the forex trader may be too scared to re-enter the market, even fully aware of the possibility of recovering the money lost on a previous trade.
How to use fear in forex trading
Basically, when it comes to fear, keep in mind that fear refers almost exclusively to future events. It can take the form of prolonging an unacceptable situation (holding on to losing orders), which can make the current situation even worse.
A good way to deal constructively with fear is to replace it with hope which can be very damaging to the trader. For example, instead of thinking, "I hope the market comes back," you can replace this thought with a much more helpful "I'm afraid I'll lose more money. Caution in trading can't hurt. This thought replacement technique can help well if you find it morally difficult to accept (and close) losing trades.
In general, if you can be disciplined and trade using a good strategy, with application and unquestioning adherence to a money management system, fear and other emotions can be easily curbed. As long as you "plan your trade and trade plan," fear can usually be kept to a minimum in your forex trading.
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bit.ly/3spSQqC
🔻FREE Telegram channel🔻
t.me/DeGRAMChannel
🔻Contact for Paid SIGNALS🔻
t.me/DeGRAMForex