There is no doubt that fear can be a paralyzing emotion when it comes to trading currencies. After all, making the decision to buy or sell a foreign currency can seem like a daunting task, especially if you are new to the Forex market. However, with some knowledge and preparation, you can learn how to defeat fear and make smart trading decisions.
One of the most important things to remember when trading currencies is that you should never let fear dictate your actions. Instead, try to stay calm and logical, and make decisions based on sound analysis. Remember, the Forex market is a long-term investment, so you should not be too concerned about short-term fluctuations in the market.
In addition, it is important to have a solid trading plan in place before you begin trading. This plan should outline your goals and strategies, as well as the amount of risk you are willing to take on. By having a plan in place, you will be less likely to let fear dictate your actions.
1) Do not risk what you cannot basically afford.
This should be your first rule of thumb! Reduce your lot size to the point where you are comfortable trading it. It does not imply that you must repeat the trade for $10 again and again; simply don’t raise the stakes until you reach a level that makes you sleepless at night.
2) Plan your moves in advance
This is the next step: having a plan! A trading plan does not have to be complicated and it does not have to include intricate details, but you should at least know what you’re looking for before you enter a trade. Having a plan gives you an idea of what your exit strategy might be if the trade goes against you.
3) Keep a cool head under pressure
This is easier said than done, but it’s critical if you want to be a successful trader. Emotions like avarice and anxiety might cloud your judgment, so keep cool and reasonable while making trading decisions.
4) Use stop losses.
This is another way of controlling your risk. If you are afraid of losing money, then use stop losses to help limit your losses. A stop loss is simply a predetermined point at which you will sell your currency if it starts to decline in value.
5) Do not overtrade!
This is by far the most common blunder made by traders. Overtrading can lead to poor decision-making and a high loss rate. Keep in mind that the Forex market is a long-distance race, not a sprint!
6) Get educated
This is probably the most important step of all. If you want to be successful in Forex trading, you need to arm yourself with knowledge. Read books, articles and blogs, watch videos, and attend webinars – anything that will help you learn about the market.
Trading currencies can be a nerve-wracking experience, but with some knowledge and preparation, you can learn how to defeat fear and make smart trading decisions. Remember to never let fear dictate your actions, and have a solid trading plan in place before you begin trading.