Author: Abdel Access

The world of forex trading can be tempestuous, as market volatility can leave you soaring with success or reeling from a loss within moments. These sudden swings of emotion can catch out the unwary new trader and this can lead to some unwise decisions. One very effective way to help you manage the roller coaster of feelings is to keep a trading journal.

 

 

Here’s a look at how to use journaling as a tool to keep emotions in check, as well as to improve your overall trading performance.

 

 

Why it’s important to be emotionally aware when forex trading

The role of emotions in forex trading is often underestimated or even dismissed by new traders. After all, it is based on mathematical principles, charts, the business of buying and selling, and a clinical balance of probabilities…what does all this have to do with our inner feelings?

 

 

The answer can be just as complex as the forex markets themselves, but the basic truth is that when we are dealing with our personal gains or losses, powerful and even primitive emotions are going to be involved. Human beings have evolved to be naturally fearful of losses, and this fear can override the pleasure of a gain.

 

 

This is logical when you think about it, because our early ancestors had to literally fight for survival, and losing valuable assets such as food, shelter, tools, family members and so on could mean extreme hardship or even death. Meanwhile, the urge to accumulate assets was strong to protect against such adverse events. 

 

 

Therefore, our brains are wired to be greedy for more, and also to find losses painful. When we are forex trading, these natural instincts can cause us to hold on to a position for too long in the hope of making a bigger profit, or to exit a position too early out of fear of incurring a loss. We need to be aware of these emotional triggers to avoid making poor decisions. 

 

 

The psychology of trading

The psychology of financial trading is not a new concept; it has been studied in earnest since the 1970s, and numerous theories have been proposed. These are based around the idea that traders are not purely rational humans who make objective decisions the whole time but are subject to biassed patterns of thinking and impulsive actions that can weaken their trading performance. 

 

It’s advisable to read widely about the psychology of forex trading to broaden your understanding of cognitive biases in relation to your decision making. This can help you to navigate the markets more effectively and make the best use of your instant forex funding.

 

 

The role of the trading journal

It’s often not enough just being aware of the importance of emotional regulation and unbiased thinking. It’s a bit like knowing that poor posture can lead to backache and all sorts of other health horrors: we probably sit up a bit straighter every now and then, but as soon our minds become absorbed in a task we revert back to our usual mode of sitting.

 

 

In the heat of a teeth-grindingly tense trade, it’s hard to think about abstract theories or step away from the flare of excitement, greed, frustration, anger, disappointment, anxiety and so on. This is where a trading journal can help to keep you on track and accountable to your decisions. 

 

 

What is a trading journal?

A trading journal is primarily a way of making a detailed record of your trades, including basics such as the time, date and currency pairs, and the entry and exit point and outcome of each trade. Beyond this, it’s important to note down your reasons for making the trade, such as evidence from technical or fundamental analysis.

 

 

The journal is not only a tool to keep track of your trades, but also a useful reference point when you are reviewing your progress or refining your strategy. It can help you to identify patterns in your least and most successful trades, and understand where the weak points and strengths in your strategy are.  

 

 

When you make your entries for each trade, get into the habit of not only recording the whys and wherefores, but also your emotional state before, during and after each trade. This not only provides you with a safe outlet for strong feelings, but also provides you with insight into your psyche.

 

 

How can a trading journal help to manage emotions?

 

Increasing self awareness

Documenting your emotions as well as your trades helps you to recognise triggers and patterns or behaviour that you might otherwise be unaware of. We all have blind spots, and even if you think you are in control, you might discover that certain situations prompt you into hasty actions.

 

 

For example, after making a losing trade do you rush in to try and compensate with a string of poorly thought out trades? This is known as revenge trading, and it can be a downward spiral because the trades are rarely based on objective research.

 

On the other hand, you might be prone to overconfidence when you make a good profit or have a string of winning trades. This can lead to the mistaken belief that you can cut corners, or an exaggerated view of your abilities as a trader. 

 

 

You might be tempted to increase your position size and make more trades before you are truly ready, leading to a reversal of fortune and a series of painful losses. A trending news report or hot tip on social media could cause you to follow the herd rather than rely on your own judgement.

 

 

By writing down a few notes about your emotional state before and after each trade, you will be able to more easily identify and address these triggers.

 

Encouraging unbiased decision making

We are all subject to unconscious biases in our thought processes. Sometimes these can be useful, because they help us form mental shortcuts so that we don’t have to think through repeated actions each time; they become second nature to us, such as dressing or making a sandwich. 

However, when it comes to more complex and nuanced matters, these mental biases can cloud our judgement. For example, we might look for the economic news that confirms our preconceptions, and subconsciously ignore the news that challenges them. 

If we are determined to find a historic pattern that has positive indicators for a potential trade set up, we might rely on just one method of technical analysis that confirms this, rather than testing out others. 

By keeping a record of our decision making process, we can look back at it with fresh eyes, or the benefit of hindsight and understand where we might be making less objective decisions. 

It can also be a chance to review trades that were particularly stressful, frustrating or exciting in the cool light of day, and help you to become a more objective trader in the future, and less subject to your emotional state. 

Keeping yourself accountable to your trading strategy

When we are feeling bruised from a loss or bad decision, it can be a natural tendency to bury the painful feeling or justify it to avoid owning up to an error of judgement. However, if you make yourself physically write down your mistake, it’s more likely that you will reflect honestly on the reasons for it, and this will influence future decisions for the better.

How to keep your trading journal

Your journal can be as simple as a notebook and pen, a spreadsheet, or a specifically designed software tool. However, to keep a track of your emotional state, a physical paper notepad can feel more personal, and you can access it quickly and easily whenever you need to. 

It should include the basic details of each trade, such as the time and date, currency pair, entry and exit points, position size, and result. You should also note your reasons for entering and exiting the trade, such as technical analysis, geopolitical events, market sentiment and so on.

Write down your feelings about the trade in a separate section. Were you confident, excited, worried, or neutral, for example, before and during the trade. How did you feel when you knew the outcome; angry, triumphant, relieved, or pleased? Reflect on how you might have been influenced by these emotions, and if you would now do anything differently. 

In conclusion, recording your emotional state in your trading journal can help you to become a more emotionally detached trader, leading to more confident and objective decisions. By regularly reviewing your entries, you can reflect on your progress and understand more clearly where you tend to stray off piste. 

This will help you on your journey to becoming a psychologically resilient trader who is capable of making steady profits. 

Patience is a virtue, and the best results come to people willing to wait. As tick follows tock follows tick follows tock, so too do the benefits of patience and the ability to choose your moment to shine follow greater success.

 

Whilst it might not always benefit you to wait as long as you can, having the capacity to wait without the temptation to seek out sources of instant gratification is often very beneficial for your health, your personal life and your career, especially for those seeking a career in financial trading.

 

However, whilst it is extremely easy to tell others to be patient, it is exceptionally difficult to do so in practice for a variety of different reasons.

 

The biggest of these is a psychological concept known as temporal discounting, where a reward feels less valuable the further away it is, which makes more immediate rewards feel more tempting.

 

This is an important concept to understand in order to see how it might be already affecting your trading decisions, as well as how it more directly pertains to financial trading decisions and what you can do to understand and overcome its effects and succeed in prop trading.

 

What Is Temporal Discounting?       

 

A slice of cake now instead of focusing on a diet, giving in to the temptation to smoke whilst trying to quit, or spending money rather than setting it aside for a rainy day are all examples of temporal discounting, specifically choosing a small benefit now rather than a large reward later.

 

Aside from zen masters or people with perfect control over their impulses and urges, every single person has given in to instant gratification at some point in their life, and temporal discounting theory works under the assumption that people naturally gravitate towards shorter options.

 

It is a form of present bias, where people tend to make decisions based on the present, irrespective of their effects on the future.

 

Temporal discounting is a framework that attempts to quantify how much value time has, or how large the reward for patience has to be before someone chooses to wait instead of taking the immediate reward.

 

The general way in which temporal discounting is explained is through the choice between a Smaller Sooner Reward (SSR) and a Larger Later Reward (LLR).

 

For example, if a person is given the choice between getting £20 now or £20 in a month’s time, people will seldom choose to wait. This is true even if the amount for waiting a month changes by an insignificant amount. Getting £22 for waiting a month instead of £20 will not change the decision much.

 

However, if a person had the choice between £20 now or £200 if they chose to wait a month, people would be far more likely to wait. The difference between the LLR and SSR is so great that people are willing to forego the immediate reward in favour of a larger reward later.

 

This could change depending on the time frame. If the choice became £20 now or £200 in a year, someone who chose to wait a month may not wait 12 months, valuing that £200 in a year as less valuable than £20 in their pocket now.

 

The amount of time at which someone values the LLR and the SSR as the same is known as the “indifference point”, and it can be a useful tool for evaluating an individual’s patience in the face of different sums of money and different amounts of time to wait.

 

In reality, temporal discounting is not that simple, and there are a lot of variables that go into the choice to wait for an LLR rather than take an SSR.

 

For example, if the example above was not simply hypothetical but was an offer for money given to you by a person, your decision to take the money now or wait for the LLR will depend on your trust in their ability to give you the rest of the money, or whether there would be some kind of deterrent for choosing the SSR.

 

Temporal discounting is rarely a consistent, solid process, but is dependent on the situation, dependent on the individual, and dependent on the mood and well-being of the person in question. People are less patient if they are tired, angry, upset or fearful, and that may influence their decision to take the SSR.

 

As well as this, people who tend towards impulsive behaviour, who are risk averse, are susceptible to social norms or peer pressure, and those who have had negative experiences waiting in the past are all more likely to take the SSR.

 

There are some other, rather unusual psychological biases that affect our ability to ascertain time. For example, if both the SSR and LLR are far enough in the future, people are more likely to be patient.

 

To return to the earlier example, if the choice is £20 in a month, or £22 in two months, people will likely wait the extra time, likely because they are going to have to wait regardless.

 

As well as this, this future value decreases the closer it comes to the present, so if you have the choice between waiting six months for £20 or a year for £200, most people would choose the £200.

 

However, if after six months they are given the ability to change their mind and take the £20 now, the temporal discount arithmetic changes drastically and more people are likely to grab the money now. A reward now is almost always worth more than a larger reward later.

How Does Temporal Discounting Affect Trading?

 

One of the biggest reasons why short-term trading plays such as day trading, short selling and opting into short-term investments are so popular is because of this temporal discounting principle.

 

Rather than focus on careful planning and building a portfolio using a robust trading plan that is barely touched once it has been set up except to check if anything has changed, temporal discounting opts towards a short-term future that is easily visible.

 

Whilst this can most visibly be seen with investments in highly volatile and speculative markets with a recklessness that borders on casino capitalism, temporal discounting can cause investors of all experience levels to fall for somewhat shortsighted decisions.

 

There are plenty of examples of exceptionally skilled investors who get spooked out of their position or those who see an asset bubble, correctly identify it as such but then invest anyway because they feel they can get in or get out.

 

In general, the random noise of the market can hide potential trends, and focusing on how an asset is valued right now is not terribly important compared to its overall trend in the medium and long term.

 

Most stocks have a down day, but that could be a small valley as part of a larger surge or a sign of choppy waters ahead. Focusing on the moment cannot really allow a trader to see how an asset is trending and whether to keep hold of it or sell it.

 

Temporal discounting is also a common reason for overtrading, a phenomenon where some traders make so many trades either due to inexperience, impatience, insecurity or a combination of all three that they offset their financial benefits or potentially risk wrecking their portfolio.

 

What Can Be Done To Stop Temporal Discounting?

 

Knowing that temporal discounting is a bias that can affect your trading is the first step to solving it. Practically everyone is affected by it to a certain degree, and there is no shame to have taken the short-sighted option in the past.

 

Most of us have picked an instant gratification option, and the worst action you can take afterwards is to be harshly self-critical. This will hurt you emotionally and make it more likely that you will take a short-term option in the future.

 

Instead, focus on strategies that can help you target long-term goals instead of being affected by factors in the here and now.

 

Automating as many decisions as possible, by using trading plans, software algorithms, stop-loss orders and a very regimented approach to trading decisions can help reduce the sway of temporal discounting.

 

Similarly, visualising your overall targets and goals will avoid the trap of focusing on day-to-day gains and losses, and the dangerous pitfall of equivocating those two with success and failure.

 

Following a rule of trying to visualise the impact of a decision 12 minutes from now and 12 months from now can help the future not feel so far away.

 

Patience is a skill, and it can be learned. You can train yourself in delayed gratification in small ways, and each time you succeed you will continue to get better and better at being patient.

 

Finally, know that you are not alone and take advantage of that. Every trader feels the temptation to be impulsive to network, make friends and act as an accountability buddy.

 

This concept, often used to great success in addiction, ensures that you have someone on your side who can keep everything in perspective.

 

Ultimately, having the flexibility to be patient allows you to make much better trading decisions, and temporal discounting is a universal feeling that can be overcome as part of that.

Social media is now an integral part of our lives, often influencing our opinions and purchasing decisions, and changing the way we communicate and manage relationships. It is also a source of information, news and advice that can be invaluable for forex traders.

 

As a dynamic sector with instant funding available that depends heavily on information, it is not surprising that many traders are active users of social media. However, this can bring challenges and pitfalls as well as advantages. Here’s a deeper look at how to use social media wisely in your trading, and the dangers that might catch out the unwary.

 

Why forex traders use social media

Following social media accounts that are relevant to your trading can help you keep up to date with the latest economic news, market developments, and tips from financial analysts and other traders. This real time access to data can be a rich seam for traders of all levels of experience, allowing you to make the best informed decisions about your trades.

 

Furthermore, social media platforms such as X and Facebook can enable you to connect directly with fellow traders and bring a sense of community. This can be important, because trading is naturally a solitary and high-stress activity, and this can be isolating and detrimental to your mental health.

 

Social media can provide traders with a sounding board not just for the technical or fundamental aspects of trading, but also for moral support when you are having a bad run, or want someone to share your successes with. You may even find a more experienced trader who is willing to mentor you and guide you towards the best sources of information.

 

As you build up connections on social media, you may receive invitations to join events such as webinars, live trading demonstrations, and even real world meet ups. This not only improves your knowledge and skillset, but also means that you will be plugged into the ‘hive mind’ and will be a better informed and well connected trader.

 

Gauging market sentiment

This ready-made community also helps you to gauge market sentiment more accurately. This is the ‘mood’ of the market, whether towards a particular currency or the market as a whole. Sentiment can be bullish, which means that the majority of traders are optimistic that a currency value will rise, or bearish, meaning that a currency value is expected to fall.

 

Market sentiment can help you to identify trends and assess risks, and it can inform your trading strategy. Experienced traders sometimes choose to deliberately trade against the market sentiment in order to take advantage of short term market rallies or sharp reversals.

 

The potential dangers of social media for forex traders

The advantages of social media for traders are powerful, but what about the potential downsides? Here’s a look at what can go wrong and how to avoid these pitfalls.

 

Information overload

Access to real time information can be invaluable, but forex is a vast subject, and this can soon lead to information overload. There are thousands of sources of information, but not all of them will be reliable or relevant to your trading strategy. Filter out the noise and verify the credentials of anyone you follow on social media.

 

Some accounts may have hidden agendas to try to influence traders into taking a course of action that is not in their best interests, or simply repost low quality or inaccurate information. Look for accounts from trusted sources such as traders who are internationally respected, financial organisations such as central banks, and credible news sources.

 

Beware of herd mentality

Even the most selective social media choices can leave you vulnerable to groupthink or herd mentality. While a sense of community has its benefits, it can also draw you into a comfort zone and weaken your ability to think critically and independently.

 

If the majority of traders that you follow are endorsing a particular strategy or market sentiment, it is easy to follow the crowd and adopt a ‘safety in numbers’ approach, even if this goes against your higher judgement or indeed your trading plan or risk management strategy.

 

Be cautious about confirmation bias

Related to the herd mentality is confirmation bias. This is when you subconsciously or consciously seek out information sources that confirm your existing beliefs and expectations. This can lead you to miss out on important information that could help you to make more objective and better informed decisions about your trades.

 

Our minds are naturally programmed to take mental shortcuts to save us from expending the time and energy of thinking through our every move from scratch, and this is obviously useful when we want to cook dinner or drive to work. However, it can also lead us to form narrow or inaccurate views on larger topics such as trading.

 

Watch out for FOMO

Social media can be a source of inspiration and support for traders, but it can also expose you to more corrosive emotions such as fear, greed, jealousy and anxiety. A phenomenon that combines all of these elements is ‘fear of missing out’, or FOMO.

 

This is when you see posts by other traders that seem to point to an opportunity that is too good to miss, or boast about a recent success. This can trigger you to make impulsive trading decisions that are not based on market research or objective evidence.

 

Even if the post is from a trusted source, the dynamic forex markets move quickly and your first instinct to follow their example could lead to a poor outcome. This could spiral into revenge trading as you attempt to make up for your mistake and avoid losing face among your peers.

 

Tips for navigating social media successfully

As we have seen, social media can offer significant benefits for traders, but it should be treated with caution. Here are some tips to use it effectively.

 

Be selective

Spend some time curating your feed and think twice before you click the follow button. If you are uncertain about an account, check who they are followed by and if the individual or organisation is affiliated with credible financial institutions or companies, or other evidence of their competence and credibility.

 

Be selective about quality, use filters to narrow down your notifications to the most relevant information only, and limit the number of accounts you follow to a manageable amount. Also try to diversify the range of analysts and traders you follow so that you are exposed to a variety of opinions and ideas.

 

Set boundaries

Social media can be addictive, and it’s easy to become sucked into a spiral of constantly checking for updates and replies. This can distract you from your other tasks and weaken your powers of concentration. Limit your use of social media by setting specific windows of time for engaging with it, and if possible use a portable device that can be left out of reach.

 

Develop your critical thinking skills

Remember social media is a useful tool and you should make it work for you, but not let it control your behaviours or thought processes. Remain open minded and curious, and respect other peoples’ opinions and approaches. However, you should learn to critically evaluate every piece of information you see rather than accept it at face value.

 

Challenge your first instincts to see if you can detect any cognitive biases in your thinking, and remain vigilant about the motives of others in sharing the information.

 

Learn to be aware of your emotions

Emotions can be powerful influences on our trading decisions, and this can be exacerbated by social media, because intense emotions are contagious and can lead to herd mentality, panic buying or selling, or bandwagon jumping. Online communication can miss the nuances and subtleties of face to face interactions, making it more difficult to read certain situations.

 

Explore the psychology of forex trading, and develop strategies to manage your emotions, such as sticking to your trading plan at all times and learning how to recognise triggers, and when to step back and centre yourself. Some people find that mindfulness, meditation or exercise is the best way to achieve this calmer and more neutral state of mind.

 

Keep an eye on the bigger picture

Social media can often blow small issues out of all proportion and lead to distorted thinking. Always put your long term goals and strategy ahead of everything else, and never be prompted to take an impulsive action by a social media post. Use it as a useful tool to work for you, but refuse to engage with clickbait or go along with herd mentality.

 

Above all, learn to develop an independent mind and don’t be easily swayed by the opinions of others, even if they are credible. They may be right, but this does not mean that the same course of action is right for you. Ultimately, successful forex trading depends on managing risk well, and this includes the risks of social media.

Forex trading with instant funding can be a very lucrative activity for the highly motivated individual. The notoriously volatile forex markets offer the potential for great rewards, but tapping into this rich seam takes exceptional focus and self-discipline. These attributes can be hard to attain, particularly with the constant churn of distractions in today’s online world.

 

Here’s a look at why concentrating on a task for long periods of time can be challenging, and some practical steps you can take to improve your focus and discipline when forex trading.

 

Why is the human mind prone to distractions?

We are all human, and our minds are not designed to focus for long periods of time on a single topic, but rather to constantly jump from thought to thought, rather like a monkey swinging from tree to tree. This is why difficulty focusing, or a restless and unsettled state of mind is sometimes referred to as ‘monkey mind.’

 

Concentrating on a demanding task means keeping a network of brain functions in action, including the frontal cortex, which is the part of the brain that overrides our impulses and keeps us on track.

 

This takes up more energy than simply letting our minds wander freely from thought to thought, and as we are naturally evolved to conserve energy, our minds tend to drift away from the hard work.

 

How can we keep a wandering mind in check?

A wandering mind is not actually a bad thing, because it can be a creative process, or a chance to see problems from a different perspective and come up with a solution. If you have ever had a great idea in the shower or when you are doing nothing in particular, this is probably why.

 

Conversely, deliberately sitting down to try and solve a difficult problem can often feel as though you are banging your head against a brick wall. There is a theory that the brain needs a certain amount of external distractions to help it fulfil its natural processing functions. Once it is sufficiently occupied, it will find it easier to focus on what’s important.

 

This may be why some people prefer to work in a slightly messy environment with some white noise, rather than an extremely tidy and silent office. However, we are all different and some people may just have a lower tolerance for distractions than others.

 

Find your comfort level

The brain is constantly seeking new stimulation, so trying to force it to focus on just one task may be counterproductive. If you pride yourself on multitasking, it may not be the best approach for forex trading, because this is weakening your ability to concentrate on one task at a time.

 

In the digital era, many people are emotionally hooked on social media and cannot resist checking their phones every time a notification pings, because it can provide an instant dopamine boost to hear from a mate or get a like or share.

 

However, this can seriously eat into your time and your mind will never be able to achieve the state of flow needed for more detailed work. Turn off all non-essential notifications and put your phone out of reach if you find it an irresistible distraction during working hours.

 

Some studies have shown that the mind is only capable of concentrating for 90 minutes before needing a break of 15 minutes or more, so bear this in mind when you are planning your work schedule. Using this break wisely may also be able to boost our ability to concentrate when we get back to work.

 

Techniques to improve concentration

Exercise helps to boost circulation and therefore the amount of oxygen and nutrients that are available to the brain, so if possible getting in a quick walk or workout on your break may be beneficial. If exercise is not possible, then meditation may be another option.

 

Regular meditation can also boost concentration levels, by training the mind to focus on the present moment through paying attention to the breath, our surroundings, or the perceptions of the five senses.

 

When thoughts naturally wander, the key is to gently direct them in a non-judgemental manner to the present. This is a method that many people find useful for managing stress as well as boosting concentration.

 

In fact, research has shown that the prefrontal cortex of the brain performs much more poorly when subject to stress, including trying to force it to concentrate for long periods without a break. Therefore, not factoring in breaks, meditation or exercise into your daily routine can be counterproductive.

 

If this all sounds rather far removed from the world of business and forex trading, it’s worth noting that some of the world’s most successful business people and entrepreneurs start their day with 15 or 20 minutes of meditation to get them in the right mindset.

 

Time-blocking

Most successful forex traders will tell you that they stick to a daily routine to give structure to their trading patterns. This is especially important for forex trading, because it can be an open-ended task with never ending research and analysis to do. If you don’t take charge of your schedule, your schedule can end up taking charge of you.

 

This can lead to you gradually leaching time from other areas of your life that are important, such as cooking and eating well, socialising and spending quality time with your family or partner, or exercising or maintaining hobbies and interests.

 

It’s important to maintain your work-life balance to avoid burnout and ensure that your mental and physical energies are topped up. The other danger of not sticking to a routine is that it is more tempting to deviate from your trading plan and make irrational decisions or impulsive trades.

 

Time blocking is a method of time management that involves dividing your day up into blocks of time that are dedicated to certain tasks, as well as breaks and leisure activities or personal administration.

 

This helps you prioritise your most important tasks and stick to a schedule. It is not set in stone and you will probably make changes and adjustments as you go along, but it provides structure and discipline for your day, which naturally goes hand in hand with forex trading.

 

The clear structure puts a full stop on open-ended tasks, and gives you self-imposed deadlines to hit so you can move on to the next task. This helps you to focus, use your time more effectively and prevents you from overlooking essential tasks.

 

If you are not used to working in a highly disciplined manner, you may not be able to manage more than a couple of hours of time blocking at first. Gradually build it into your day so you get used to maintaining your focus rather than constantly jumping between tasks.

 

Concentration is like a muscle that gets stronger the more you use it, so regard it as a mental gym workout, and gradually step up the intensity over the course of a few weeks.

 

Be realistic about what you can achieve, and don’t overburden yourself with weighty expectations. Reward yourself for small wins, and don’t become excessively negative or angry when a trade doesn’t go your way. This is a normal part of forex trading, and it is a marathon, not a sprint, so remain positive and patient.

 

Have a trading strategy and stick to it

It goes without saying that you should have a solid trading strategy and risk management strategy in place, so that you are not making random trades that would be no better than gambling.

 

Set clear objectives and have a predetermined entry and exit strategy for each trade. Do not be influenced by market volatility, rumours or peer pressure to deviate from your trading strategy; only do this in exceptional circumstances when there is clear and objective supporting evidence. Keeping a journal can help you to remain accountable to your goals.

 

Avoiding overtrading

Part of the discipline of forex trading is recognising when you should step back and leave well alone. Novice traders can take some time to realise that less is more, and that placing fewer high quality trades is more fruitful than placing many weaker ones.

 

Overtrading may also be driven by a ‘fear of missing out’ or FOMO, where it seems that the perfect trade is just around the corner. The truth is that there is no such thing as a perfect trade, and the pursuit of it will eat into your time, resources, and profit margins.

 

New traders can also be easily led by their emotions and unconscious cognitive biases, which can encourage them to become greedy in their pursuit of profits or overly fearful and cautious about making a loss. This means that they never achieve a level of consistent profits.

 

This undisciplined approach to trading may be exacerbated by a ‘lucky break’, or a trade that turns out well even though you didn’t follow a carefully structured trading plan. This unjustified success can lead to overconfidence, and the sense that you might have a natural instinct for forex trading.

 

The fact is that forex trading is all about the opposite of instincts; it is about learning to recognise and avoid subjective thought processes, and learning how to make objective decisions based on a balanced and unbiased assessment of all the evidence.

Many people wonder if it is possible to balance forex trading with a full-time job, and the answer is yes, it’s certainly possible. Like most aspects of life, it does take some planning and preparation to achieve the best results. It’s important that you do not compromise your performance in either role by overstretching yourself.

 

Here are some tips to optimise your strategy and mindset to successfully combine forex trading and your full time job… and how trading could even become your main career.

 

Define your goals

First of all, it’s important to set out what you want to achieve, and to manage your expectations to ensure they are realistic. Do you want to earn some spare cash from your trading to put in a nest egg or pay for treats such as holidays and meals out? Or do you ultimately aim to make trading your full time career?

 

Make a clear-eyed assessment of your circumstances: do you have a regular nine to five and rarely work outside of these hours? Do you have a lot of commitments outside of work, such as family responsibilities, sports, hobbies, or voluntary work? Are you in a position to delegate or give up any of these demands on your time?

 

What is your current level of knowledge and experience: if you are a complete novice, you will need to devote some time to learning the basics and practising with a demo account before you let loose on an instant forex funding platform. Consider how much capital you can realistically afford to invest, and put a solid risk management plan in place.

 

Decide from the outset exactly how much time and money you have to devote to trading and what you want to get out of it. This will help to clarify your approach and make sure that you are focused and not overfacing yourself.

 

Sharpen up time management skills

Effective time management is at the heart of balancing trading with your existing responsibilities. Draw up a daily schedule with allocated blocks of time for trading and other duties. Set goals and categorise them in order of priority, and develop a daily trading routine so you don’t neglect certain areas and waste too much time on others.

 

Consider if you have times of the day when you feel at your most alert and productive, such as first thing in the morning, directly after a workout, or late at night when the rest of the household has gone to bed. Schedule your most demanding tasks for these times.

 

At first, this process will probably involve trial and error as you find your feet and gain a more realistic idea of how long it takes you to complete each task. Some forex tasks are open-ended and can lead you down rabbit holes, so monitor the time spent on these carefully and learn to focus only on what is most relevant to you.

 

Decide on your trading style

Part time trading may limit the types of trades that you can carry out successfully. For example, scalping and day trading require careful monitoring and significant time commitment throughout the day and may not be compatible with a full time job.

 

Long term trading where you keep positions open for days or even weeks or months are less time-intensive and may be more suitable for part time traders. It’s always better to focus on quality over quantity, so don’t be tempted to over-trade to compensate for limited timeframes.

Keep a trading journal

Keeping a trading journal may seem to be a rather unnecessary and time consuming chore, particularly when there is an accessible digital footprint of your trades. However, by keeping a detailed record of your reasoning for opening a position and your target price points, you will be able to more accurately measure your performance and correct any mistakes.

 

Don’t neglect your wellbeing

Balancing two jobs will inevitably absorb a lot of your physical and emotional energy as well as your time. Guard against burnout by carving out time to take care of yourself: ultimately, your wellbeing impacts on your ability to perform well so this is not self-indulgence or laziness.

 

Make time to exercise, eat well, and chill out with relaxing and undemanding activities such as listening to music or watching TV at least a few times a week.

 

Build a support system, both by networking with other traders and explaining your goals to your family and friends. This will help you pick up ideas and advice and give you somewhere to turn on those inevitable days when you wonder if you are doing the right thing.

 

Be disciplined and persistent

Finally, you will need to be highly disciplined to stick to your routine and work in a consistent manner. Forex trading rarely brings instant large rewards, but requires patience and hard work.

 

How to turn forex trading into your full time career

So you feel as though you are smashing forex trading as a side hustle, and are starting to nurture ambitions about turning it into a full time career. This is the dream for many, bringing the flexibility of being your own boss, and potentially unlimited earnings. Naturally, it also brings challenges and should not be done on a whim.

 

Here are some points to carefully consider, and how to successfully make the transition.

 

Make an honest evaluation of your current situation

Be honest with yourself and examine your reasons for wanting to go full-time: is it to escape the treadmill of a nine to five that you hate, or because you genuinely enjoy and thrive on the process of planning and executing trades? Your reasons should be weighted towards the latter, rather than purely because you are trying to get away from a negative situation.

 

The most successful forex traders do not prioritise making huge profits: they relish the whole picture of monitoring the economic news, mastering technical analysis skills, and exploring the best currency pairs to work with. Profits arise as a result of diligent and methodical planning and risk management, and not because of a single minded pursuit to get rich.

 

Review your performance over the last six or 12 months (if you have not been trading part time for this long, you are almost certainly not ready to step up to full time trading). If you are already making consistent profits as a part time trader, then you are already in a great starting position.

 

If you have not yet reached the level where you are making more gains than losses in your trades, or your performance is very uneven, you will be putting yourself under too much pressure by attempting to go full time. This could push you into taking risks and you will find it more difficult to manage strong emotions such as fear, greed, and panic.

 

Consider your trading environment

When part time trading, it’s easier to tolerate a less than ideal working environment. However, if you are going to make a full time go of it, you will really need a comfortable and distraction free place to do your best work. If you cannot have a room to yourself, zone off an area to create a physical and psychological barrier between your home and work life.

 

Review your trading strategy and style

As a successful part time trader, you will already have developed a trading strategy and probably stick to one particular style of trading. Consider if you need to adapt or diversify your approach.

 

For example, you will have the opportunity to make trades at any time of the day, and be able to monitor them more closely, so you may want to switch from position trading to day trading.

 

Financial planning

If you are intending to earn your living from full-time trading, you will need to ensure that you manage your finances carefully. Ideally you should have savings to cover your living expenses for at least the next six months to provide a backstop while you establish your full time career.

 

If possible, gradually decrease your part time hours rather than give up a steady income stream altogether. If you are currently employed, consider if you could transition to freelance work for an interim period. This will give you peace of mind that you can earn money if you really need to, and take the pressure off your fledgling trading career.

 

Draw up a budget to keep track of your monthly outgoings and income, and remember to factor in how much income tax you will pay as a self-employed person.

 

Remember that such a big step will rarely be straightforward, and you will need the strength of mind and resilience to persevere through uncertainties and setbacks. However, with a disciplined and careful approach and a commitment to continuous learning and development, you can become a successful part time or full time forex trader.

Forex trading can be an exhilarating and rewarding endeavour, but it can at times be a stressful pursuit, with a lot of high pressure decisions and worries about profitability and success. Here’s a closer look at the potential sources of anxiety in forex trading and the most effective methods for managing and reducing it.

Identifying the causes of trading anxiety

The first step is to pinpoint the causes of your anxiety. Not all anxiety is bad for us; it’s a natural human response that is intended to sharpen up our physical and mental reactions when we are under pressure or feel threatened.

It can be useful, giving us an extra burst of adrenaline to help us respond to a dangerous situation such as getting caught in a riptide, or the mental clarity and stamina to perform well in an exam, or indeed during a high-stakes forex trade.

Everyone feels anxious from time to time, and it is not necessary to try to overcome it unless it starts to intrude on our daily lives in a way that is out of proportion to the cause. For forex traders, anxiety can mean their approach becomes too hesitant and fearful, or too rash and ill-considered, leading to mistakes and missed opportunities.

Therefore it’s important to be aware of the signs that you might be afflicted by trading anxiety, and take steps to overcome it.

What are the symptoms of anxiety?

Anxiety can have both mental and physical symptoms. It’s most commonly experienced as feeling on edge and panicky, a sense of detachment, feeling restless and being unable to concentrate or make decisions, and a sense of dread or unease.

Physical symptoms might include headaches, muscle pain, shaking, dizziness, sweating, shortness of breath, and a fast or irregular heartbeat. In severe cases, anxiety might even lead to a full-blown panic attack. However, everyone’s experience of anxiety will be slightly different, just as we all have unique triggers or reasons for feeling anxious.

For some people, persistent levels of anxiety might manifest in behaviour such as withdrawing from friends or family, and avoiding certain activities or situations. Some people seem to be naturally more prone to anxiety than others, which may be a result of temperament or personality traits, upbringing, environment, or past experiences.

If you are worried about anxiety affecting your forex trading performance, first of all it’s important to determine the causes. Think about the trading situations that make you most anxious, to a point where it is impacting on your ability to make clear and rational decisions. Here’s a look at the most common reasons forex traders feel anxious.

 

Market volatility

The forex markets are characterised by sudden and unpredictable moves and this lack of control can be a source of anxiety for some traders. However, the sudden sharp swings in price points also offer opportunities and this needs to be seen as an advantage rather than a source of fear or anxiety.

Setting unrealistic expectations

It is a common mistake for new traders to be overambitious and expect too much from themselves. They might be fixated on making the perfect trade or the potential outcome of every move. However, the reality is that it takes time, effort and patience to make consistent profits in forex trading, and it is unlikely that success will arrive straight away.

Instead of fixating on the outcome of each trade, set yourself small achievable goals and focus on the process rather than the end result. If you see trading as a get rich quick scheme then you are likely to be setting yourself up for a lot of pressure, failure, and frustration.

Make sure that you have another steady income source besides trading, do not invest more capital than you can comfortably afford, and do not expect large profits immediately.

Trading with too much leverage

With instant forex funding platforms available that offer high leverage ratios even for modest amounts of capital, it can be tempting to take out large position sizes to maximise potential rewards. However, if you are trading with more than you can afford to lose, you are obviously taking a huge risk and this will inevitably lead to high levels of anxiety.

Instead, start small and increase your position sizes in small increments as you gain confidence and experience. This brings us neatly onto our next point…

A weak risk management strategy

Without a solid risk management strategy, you are effectively doing no more than gambling with your forex trading. It can be tempting to take the attitude that the forex markets are unpredictable so it is not worth putting much effort into this area, but in fact successful forex trading is not about chance or luck, but all about taking carefully calculated risks.

Never trade with more than one or two per cent of your capital in the early stages, and use stop losses to limit the amount that you can potentially lose on each trade. Always stick to your trading plan, even if you feel that rising tide of anxiety when a trade isn’t going your way. Step away and centre yourself before taking any further action.

Insufficient knowledge or technical skills

If you dive in headlong without sufficient preparation, you will soon feel out of your depth and this can drive anxiety levels sky high. Learn as much as you can about the basics of trading and how the forex markets operate before you begin, and start off with a demo account before you go live.

Make sure that you understand some basic technical analysis methods such as line graphs and bar charts, and have a grasp of how global and economic events can impact the forex markets.

Information overload

The flip side of being underprepared is trying to learn everything there is to know about forex trading. It’s a vast and ever-evolving field, so this would be a Sisyphean task for even the most experienced of traders. Accept that you can never know everything, and stay well informed but focus on data and news sources that are most relevant to your trading strategy.

Fear of failure

Learning how to deal with losses is part and parcel of the forex game. Remember that even when you are making consistent profits, only about 50 per cent of your trades will be wins. Learn how to take losses in your stride, rather than seeing them as a sign of personal weakness.

Do not let your anxiety drive you to make more trades in an effort to compensate for a bad loss, and be vigilant for other powerful emotions such as anger, shame, or greed. Forex trading requires objective analysis and any emotions clouding your judgement will only compound your problems.

Methods to manage and reduce your anxiety around forex trading

It’s important to deal proactively with anxiety that may be affecting your forex trading. This is to ensure that it is not leading to rushed or biassed decision making that can perpetuate the cycle of anxiety.

Have a daily routine

 

Follow a consistent daily routine to help you avoid making unnecessary mistakes and give you a sense of order and control over your trading career.

 

Pay attention to your trading environment

 

Make sure that you have a quiet and uncluttered space to work that is free from distractions. It should ideally be spacious and comfortable with good ventilation and natural light. Take regular breaks and get outside for short walks to relax and clear the mind.

 

Keep a trading journal

 

Keeping a detailed journal of all your trading decisions can provide insights into your patterns of thinking, and help to identify any issues that are a particular source of anxiety.

 

Reach out to the trading community

 

Connect with other traders, either online or in person. This will bring a sense of community as well as a source of advice and moral support when times are tough.

 

 

Consider the wider picture

 

You should also consider if your anxiety is purely forex related, or if it is part of a wider mental health problem that could be rooted in other areas of your life. If you feel that this might be the case, it is important to be honest with yourself and others about the way you are feeling.

Some people feel anxious and on edge all the time without any clear causes or triggers, a category of mental health disorders referred to as Generalised Anxiety Disorder. It’s a recognised medical condition, so if you decide to seek medical advice you may be offered treatment such as medication or talking therapies, or guidance on lifestyle changes.

If your anxiety is impacting your trading, remember that this is a very common condition that affects almost all traders at some point. To a certain extent, you can harness this anxiety to keep you motivated and mentally sharp, but do not let it control your thoughts and actions.

Pinpoint the causes of your unhelpful anxiety, and take steps to overcome them, whether through a calm trading environment, a careful risk management strategy, or a good work life balance. Remember that good mental health is just as important as technical knowledge and skills when it comes to successful forex trading.

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