Most people do not realise that in life their physical actions are determined largely by what their mindset is like at any particular moment. When in anger many people lash out and forget their manners. Similarly, when depressed, many people stop working and start wallowing in their misery.
The same is true when it comes to foreign exchange. If you are emotional while trading then your actions would be different to if you were objective. In the majority of cases, this means losses. Thus, it is extremely important for you to prevent yourself from getting emotional. How does one do that though?
Just like your emotional state can affect your actions, you can implement actions that will affect your emotional state. In this way you can head off the aspect of getting emotional in the first place. Consider the following.
Look for Signals Instead Of Guessing
When you guess the direction of the market, you will automatically invest yourself emotionally to your foreign exchange trades because the decision would be made by your heart instead of your head. On the other hand, if your decision was based objectively on numbers or conditions which would combine as signals, then this would not happen to you.
Always Follow the Trend
What is a foreign exchange trend? It is a sustainable movement of forex rates in one direction. Sustainable is key here because it means that the rates would move in that one direction for the foreseeable future.
This is the easiest way through which you can make money on the foreign exchange which is why you should always try to take advantage of any trends that you spot in the market.
If You Lose Then Learn and Move On
Even if you are completely objective, you will lose some foreign exchange trades. These are dangerous situations because they can push a trader over the edge emotionally, especially if the losing streak is long or if the loss is too big.
Losing is inevitable in forex trading and instead of getting emotional about your losses you should study them, learn from them, and casually move on to your future trades.
Every Change in Strategy Must Be Analysed
There is a lot of power in consistency. This is particularly true for the forex market. If you can manage to be consistent then you can make a considerable amount of money on the foreign exchange.
Consistency is based on planning which means that you cannot change anything in your routine or your strategy without carefully analysing that change. Therefore, there should be no impulsive decisions and you should carefully analyse every titbit of information before changing anything.
Learn from Winners Too
It is not only your losing foreign exchange trades that have something to teach you about the market but also your winning trades. While your losses would show you what not to do your winners would show you what you should try to always do in the market. Therefore, you should analyse your winning foreign exchange trades as well.