Category: General

Forex trading is not just about developing a solid trading strategy: it’s the decisions you make in the heat of the moment that really count. None of us can act in a truly objective and unbiased way 100 per cent of the time, and this can cloud your judgement and negatively impact the outcome of a trade.

Our emotions can also distort the decision making process, often before we realise it. Strong emotions can be erratic and arise suddenly, and the high stakes and intense pressure of making quick financial decisions can amplify whatever emotions we are experiencing. 

This is why successful traders work just as much on cultivating their mindset as they do on their trading plan. The mental and emotional aspect of trading is broadly classified into two types: cognitive biases and emotional biases. They occur from distinct psychological processes, so it’s helpful for traders to gain an insight into how they impact their decisions.

Here’s a closer look at the differences between these biases, what they typically involve, and strategies to manage them.

Cognitive biases

Cognitive biases are subconscious thought patterns that can lead to errors in logical thinking, and influence judgements and decisions. It is impossible to be entirely free of them, because it is the brain’s way of making mental shortcuts and protecting our minds from information overload: no one can ever know everything. 

These biases affect us all in unique ways, because we all interpret information differently and have different memories and educational and social experiences. Often we are not aware of biassed thinking in our everyday lives, because it can be subtle and deep-rooted. However, it’s important to understand how they might influence your trading decisions. 

Confirmation bias

Confirmation bias is when we seek out information that confirms our existing beliefs and opinions, and ignore anything that contradicts or challenges them. We may also assume that everyone else shares the same views, and that there is nothing further to learn about a topic beyond what we already know.

This type of selective thinking can mean that traders miss out on valuable information when carrying out fundamental analysis, and this can weaken the quality of their trading strategy. It can also result in errors in the interpretation of technical analysis tools, because the trader may look for patterns that confirm their expectations, rather than draw objective conclusions.

For example, if you believe that the market is bullish due to sentiment on social media, this can lead you to adjust your exit points from a trade in the expectation that the value of a particular currency will rise. However, the opinions of economists and respected news journalists might provide a different view, which you failed to take into account.

Overconfidence bias

Overconfidence bias is a pitfall that can catch out some new traders, particularly after a big win or a run of successful trades. This can create a false sense of confidence that is not based on the reality of the trader’s knowledge and skills, but an inflated belief in their ability to interpret the forex market.

This can result in the trader taking bigger positions or making too many trades, and being less cautious with their risk management policy. This can expose them to significant losses, because of the cognitive gap between what the trader believes is right, and what the best course of action should be. 

Anchoring bias

Anchoring bias is the tendency to fixate on the first piece of information a trader finds about a particular market opportunity, and use that information as their reference point without adjusting their thinking when they encounter further information. The first reference point may be entirely arbitrary, and there is no justification for prioritising it.

This can be damaging for forex traders, because it may cause them to miss the ideal time to exit a trade and hold on past its peak. It can also result in them selling too early in a trade, or trading with underperforming currency pairs. Anchoring bias may occur when a trader is rushing or making too many trades that are under researched and likely to perform poorly. 

Disposition bias

The disposition bias, also known as the disposition effect, can sabotage your chance of success in forex trading by prompting you to sell profitable trades too early, and to hold on to losing trades for too long. This is a natural human trait to try to protect our assets, and it’s a complex cognitive bias because it can be subtle and crosses over with emotional biases.

Almost all of us are conditioned to be loss averse, because we fear the pain of losing more than we seek the pleasure of success. We may think that we are being cautious and taking the right course of action, but in fact we could be standing in our own way. Of course, it’s important not to overcompensate and neglect to manage risks properly.

Emotional biases

Emotional biases are when a trader makes decisions that are driven by their feelings rather than logical thought processes. Forex trading can bring out powerful emotions in even the most stoical of characters, because ultimately we are dealing with assets that we all need to secure our survival and comfort. 

Therefore it’s not surprising that we are all prone to primal emotions such as fear and greed when we are trading. Wise traders do not try to suppress or deny these emotions, but learn how to recognise them and take action to separate them from their decision making process. 

Greed

Naturally, the goal for all traders is to make profits rather than lose money, but when the desire for profit overrides good trading decisions it can have the opposite effect. Traders who view the markets simply as a ‘get rich quick’ opportunity may be particularly vulnerable to greed, causing them to over-leverage or hold onto winning trades for too long. 

Greed can also prompt traders to make impulsive decisions and disregard risks, leaving them more exposed to heavy losses. 

Fear

As we have seen, fear is an emotion that can lead to loss aversion bias, and it’s the flip side of greed. Instead of actively seeking profitable trades, fear can cause us to be overcautious, exiting trades as soon as they are in profit rather than sticking to our trading plan, or holding on to a losing trade in the hope that the market will turn, even if there is no evidence of this.

Fear can evolve into panic if the markets turn volatile, causing potentially disastrous decisions. 

Fear of Missing Out (FOMO)

FOMO is a type of herding behaviour, and it stems from the natural human desire to feel like part of the crowd. Most of us tend to seek safety in numbers, and this is also true when it comes to the forex markets. If the sentiment is running in one direction, it can feel very uncomfortable to tread your own path.

However, chasing market trends rather than making well-informed independent decisions can lead to badly timed trades that get caught up in sudden reversals of fortune. 

How to overcome cognitive and emotional biases in forex trading

Reflect on your performance

Over time, forex traders will learn how to recognise and manage some degree of bias and emotional decision making. This often comes with knowledge and experience, and the old saying ‘we learn by our mistakes’ applies here. The key is to reflect on what went wrong in your unsuccessful trades, and question if any of your decisions were biassed or emotion-led. 

Assess your performance every few weeks. Keeping a trading journal will help you to do this more accurately. Don’t just write down the factual information about each trade, but also record something of your state of mind and emotions before, during and after the trade. This will help you to identify and challenge any negative behaviours.

Stick to your trading plan

One of the most effective ways to avoid emotion-led decisions is to always stick to your trading plan. This avoids any impulsive behaviour and exposure to unnecessary risks. This is not to say that you should not adjust your trading strategy, but that any changes should be based on logical reasons and back tested on a demo account first.

Stress management

Forex trading can be an emotional rollercoaster, and may even lead to elevated stress levels that make it even more difficult to develop a good trading mindset. Many successful traders use practices such as mindfulness meditation to help clear their minds of mental clutter before they start their day’s trading. 

So there you have it!

Understanding the differences (and crossovers) between cognitive and emotional biases can help you to create a stronger trading plan and make more objective decisions. Forex trading psychology is something that most traders will come to master with time and experience. 

When we are aware of the traps that our minds can drive us into, we are equipped to navigate the forex markets more effectively. 

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One of the key lessons new forex traders learn is the importance of putting together a solid trading plan. This involves using specific techniques such as technical or fundamental analysis to help you make well-informed buying and selling decisions, and to make the most of the lucrative opportunities offered by instant forex funding platforms.

It can take some time and experience to build an effective trading strategy, and even seasoned traders regularly review and make adjustments to optimise their plan. Nevertheless, it’s important to make any changes after evidence-based research rather than abandoning your plan at every setback, or halfway through a trading session. 

Here’s a look at some of the reasons why your trading plan might be underperforming, and the right way to introduce changes.

Overcomplicating your strategy

New traders often assume that the more detail they pack into their strategy, the more effective it will be. However, this is not always the case: sometimes very simple strategies can be just as effective as more complex ones. There is no need to try to anticipate every move in the market, as you will just get bogged down in information overload. 

It is possible to copy the strategies of more experienced traders that you hope to emulate, but chances are you won’t fully understand it. This is not to insult your intelligence, but rather because the trader will have probably evolved their plan over time, and it would be impossible to be familiar with all the nuances without fully knowing the whys and wherefores. 

The best course of action is to start off with a simple strategy that is straightforward to carry out, based on solid fundamental and technical analysis. 

You have unrealistic expectations

Many new traders set unrealistically high profit targets for themselves. This is understandable, as ultimately we are in this game to make profits and the allure of ‘get rich quick’ is strong. However, this is likely that you will put too much pressure on yourself and end up making poor decisions, or become so discouraged that you give up altogether. 

Instead, set yourself small achievable goals that are backed up by a clear risk management plan. Remember that successful forex trading is not about wild highs and lows, but a steady process of taking carefully calculated risks. 

You have not backtested your trading strategy

The best way to ensure that your trading plan is watertight is to test it out on a demo account first. This not only helps you to become familiar with it without risking any real money, but will also reveal any glaring holes. 

It is unrealistic to expect any strategy to return profits with every trade, but if after a run of two or three months on a demo account where you have made more losses than gains, you will know that the plan is ineffective. Make sure that you keep a trading journal and write down your reasons for making each trade, so that you can analyse your performance. 

This will help you to identify any weaknesses in the trading strategy and make the necessary adjustments. For example, if you are a very impulsive and impatient person who likes to get instant results, then you are probably more suited to day trading or swing trading. 

You are implementing the plan inconsistently 

The golden rule of successful trading is to follow your trading strategy. As we will discuss in the next point, a trading plan can, and should, change over time and to respond to the current market conditions. However, you need to stick to your plan consistently for a certain length of time to assess its effectiveness.

Unless the financial markets are rocked by a sudden catastrophic event, you should never deviate from your plan mid-trade as this could leave you exposed to excessive risks. A plan helps you to maintain a systemic approach to your trades, and avoid making impulsive decisions that might be led by your emotional responses rather than rational processes.

Do not underestimate the role of psychology in the success or failure of your trading strategy.

The strategy is not evolving

Some traders become fixated on the concept of the bulletproof trading strategy that will guarantee them wins, but there really is no such thing as the Holy Grail. Your trading plan should not be cast in stone, but treated as a live project that needs space to breathe and grow. 

The forex market is the most dynamic and volatile financial market in the world, and it is strongly influenced by a wide range of factors, from geopolitical events to the latest economic data releases. Therefore trading strategies are rarely a case of sticking rigidly to the same approach, of maintaining a system of checks and balances.  

This is not to say that you should deviate from the plan in response to every ripple in the market, but rather that a good trading strategy is always a work in progress. As a forex trader, you should also be a diligent student, continually expanding and updating your knowledge so that you can make the best trading decisions. 

If your current plan is returning steady profits and you are satisfied with your progress, you may not need to do any more than periodically review it and ensure that it is up to date with the current market developments. 

Your trading plan is incompatible with your personality and lifestyle

It may be that the trading plan is fighting against your natural tendencies and lifestyle. For example, if you are a naturally cautious person with a low risk tolerance, then a strategy that involves a high risk vs. reward ratio may not be suitable for you. On the other hand, if you are naturally quick witted and impatient, long term positions trading may be too slow for you.

Spend some time considering your personal traits, best qualities and weaknesses. You may even wish to take an online personality test to obtain a well-rounded and objective assessment, because we all have blind spots. 

You could also ask family and friends or work colleagues, but they may not be completely honest for fear of causing offence (or maybe a bit too honest: sometimes the truth can be hard to handle). 

However, there is no need to aim for perfection or try to correct any ‘weaknesses’. We are all naturally more able and skilled in some areas than others, so it’s an opportunity to identify and focus on what you do best. 

Another factor to consider is how much time you have to devote to trading, and whether you view it as a side project to earn a little extra cash, or if you are working towards the goal of a full-time trading career. Determine your risk tolerance and make sure that this aligns with your trading plan. 

It should take into account your personal financial situation, how comfortable you are with taking financial risks, your profit targets, and your current level of knowledge and experience. Be honest with yourself about your current situation: you do not want to compromise your ability to pay for life’s essentials. 

If the thought of losing the amount of money you are risking on each trade is keeping you awake at night, then you are obviously not comfortable with your trading strategy, and will also be harming your psychological wellbeing. It may be that you could benefit from discussing your financial situation and investment goals with a financial advisor. 

Furthermore, you need to consider how much time you have to devote to trading, and how you will maintain a satisfactory work-life balance. If you are fitting in your trading around a full time job or other commitments, then your trading plan would work best with long-term trading that is less time intensive than day or swing trading. 

Conclusion

If your forex trading strategy has so far returned disappointing results, then it’s time to review and adjust. Very often, new traders try too hard with overcomplicated strategies that are copied from more experienced traders, but it’s never a one size fits all approach. Start simple, which can be just as effective if it’s carried out properly.

Find a balance between having the discipline to stick to your trading plan consistently and revising it in the face of changing market conditions. Successful traders are emotionally intelligent and do not allow fear, greed, panic, or anger cloud their trading decisions. 

The most effective way to do this is to always have a well-optimised trading plan and stick to it during stressful trading moments. Do not be tempted to deviate from your plan mid-trade; revisions should be made when you are in a calm and objective frame of mind. 

Refining your strategy is an ongoing process, and learning to adapt in the face of challenges is all part of the learning curve. Educate yourself and learn from others, and over time your patience and persistence will begin to pay off. 

The most important decisions that we need to make in life and in work are not always in the easiest of circumstances, and many of us have stories of how the heat and pressure of a situation got to us.

In an ideal world, we would take as much time as we could to consider every single action, its consequences and every alternate action possible, but this is seldom the case.

Much like how if you wait for the right time to get started you will never get done, if you wait too long for the right time to make a decision, it will often be made for you, not always to your advantage.

However, pressure has a demonstrable negative effect on how we make decisions, and too much pressure in the wrong place at the wrong time can be disastrous when a lot is on the line.

A prop firm portfolio with significant amounts of money in it is a particularly notable example of this in action, and there are countless stories of investors under huge amounts of pressure who saw their investments plummet due to fear or greed, action or inaction.

Because pressure and stress are such a personal part of investing and affect everyone differently, here are ten top tips and strategies for navigating difficult decisions when the heat is on and you need to act now. 

Take A Deep Breath

There are two speeds in investment: stationary and warp-speed. There will be many points during a trader’s day where they are waiting for action, and then when it comes time to make a decision there is such a breathless rush to do something that it is not always the right choice.

Even in a frantic situation, there is time to take a breath, pause for just a moment and give yourself time to take a view from a wider perspective.

This is an effective way to avoid emotional investing or falling into standard trading habits, as well as calm your mind.

Front-Load Your Decision-Making

Investors will often talk at great lengths about the value and virtues of having a robust trading plan as part of your investment setup and trading strategy, and whilst there are a lot of other reasons why you should make a plan, one of the most immediate benefits is when it comes to decision making.

A trading plan allows you to front-load the decisions you need to make and give yourself the time you need to make the right choices, allowing you to execute as quickly as you need to when the time comes.

Rather than agonise about whether you should get into or out of a position, check the trading plan, the conditions and whether these are the right circumstances and go from there.

It also means that rather than having to think about decisions every time you make them, you only need to consider whether your plan needs adjusting.

Ask If A Decision Needs To Be Made At All

In investing, a lot of the situations where you are under pressure to make a choice might potentially be illusionary, or examples of the random noise of the market spooking traders into making impulsive decisions.

Most securities and forex currency pairs oscillate up and down thousands of times a day but retain the same general value once the market closes. Look for the trend rather than the price action.

In particularly volatile markets, it may be best not to make any moves at all. Make sure your Stop Loss orders are set to avoid losing too much on your investment and wait for the market to settle.

Sometimes, the only winning move is not to play, but do not use this to make an excuse in situations where you have to make a choice.

Ultimately, not doing anything is a choice, and if a decision does need to be made, procrastinating on it could potentially lead to a worse outcome.

Focus On The Long Game

Ultimately, the goal for a funded trader is to hit their profit targets, which are usually far enough away that outside of a market meltdown, a constant string of losses or a huge miscalculated gamble, no individual trade is going to prove ruinous.

Instead of focusing on which trades made or lost money, look at the bigger picture and whether you are trending towards your goal or not.

Don’t Dwell On The Best

There are so many choices to make when on the market that it can cause inertia and paralysis. The biggest reason for this is that people want to make the best decision possible, but in a fast-paced volatile market, this might not be possible.

Much like with a trading plan, if you need to make a decision and make it quickly, move quickly through different stages.

If you cannot make the best course of action, make one that is good enough. If good enough is not possible, go for the least worst. Taking a loss now is far better than waiting for the market to rebound unless you have strong, objective reasoning to believe in a recovery.

Perfection is a luxury that requires a lot of time. Keep moving forward.

Seek Advice From Peers

The acute pressure and stress that comes from having to make a decision quickly often make us believe that we need to make this same decision alone, but that is not necessarily the case.

Keeping a network of friends and peers around can be really helpful if you are struggling to make a decision, and it is always worth asking whether something you are uncertain about might be a bad decision.

Even friends who are not in the industry can help simply by acting as a sounding board; you do not necessarily need to take their advice, but putting it into words and communicating it can often be enough to get your synapses working on a solution.

Start With A KISS

The market is complex and your wider trading strategy will often be complex out of necessity to factor in the millions of factors that shape the market every day.

However, when it comes to the actual decisions you need to make, the best advice is the old American aphorism “Keep It Simple, Stupid”.

In the original context of aircraft design, “stupid” means to keep it straightforward and effective 

so that any mechanic can tweak it and repair it, and that principle applies to decision-making.

It is easy to tie yourself in knots trying to think too far ahead, especially if you are pressed and under pressure, so avoid overthinking and making a worse decision as a result.

Do Not Take It Personally

You are not your record, and absolutely no investor gets it right every single time. In fact, the one trader who claimed to have an almost bulletproof record of “winning” trades went bankrupt and ultimately spent time in prison.

With that said, seeing the line go down and a minus next to your portfolio’s balance for the day can be deeply dispiriting, the result of us being wired to be averse to losses. We are made sadder by a loss than made happy by a gain of the same worth

However, assigning your ego and worth as a trader to each trade you make is asking for trouble, so instead of seeing each position as a contest, look towards the prevailing trend.

Many established traders will have a really bad day, feel completely thrown off but then check their long-term targets and remain above target. Taking a loss is sometimes the right move.

Making the wrong decision under pressure is not failing, it is learning, and the more you work under pressure, the more learning experience you will get.

Avoid Piling On The Pressure

Much like how a trading plan is important for many reasons beyond pressure relief, risk management protocols are not only important for self-evident reasons, but they can also help to avoid unmanageable levels of pressure in investment situations.

The most stressful situations are those where there is a high price for failure, but in reality, there should not be a situation where a single bad move or swing of the pendulum wipes out a portfolio’s value.

Diversify, factor in the most likely outcomes as well as the most potentially impactful ones, and avoid certain types of investment such as short-selling, where a badly-timed squeeze could potentially lead to infinite losses.

Trust Yourself And Commit

Once you make a decision, act on it earnestly and wholeheartedly, because ultimately the people who make the best decisions in high-pressure scenarios are those who trust their instincts, decision-making and skills in relevant fields.

Some of the best decisions we make in life come from intuition, based on the subconscious processing of information, and used in combination with a trading plan and as much research as you can access can lead to some highly positive outcomes.

It is, however, important to know the difference between intuition and trading based on emotions and practice in trusting yourself and committing to trading tactics will help you parse the difference for yourself.

The trader’s mindset is just as crucial to their success as technical analysis and strategy, yet this aspect can sometimes be underestimated by new traders. Successful forex trading calls for the ability to perform well under pressure, bounce back from failure, and have strong focus and discipline. 

This winning attitude has a lot of parallels with sports psychology, and as we have just enjoyed the spectacle of the Olympic Games and look forward to the Paralympics, it’s a good time to be inspired by and learn from this sphere. 

The athletes have trained intensely over several years to reach the pinnacle of physical fitness, but winning is about much more than being the fastest, jumping the highest or throwing the furthest. 

When Keely Hodgkinson won gold for Team GB in the 800m, she said that winning the race was 90 per cent about mental tactics, from learning to pace yourself and place yourself within the pack, to building up resilience and believing in yourself even when you are behind. She has also spoken about her battles with mental health after the Tokyo Olympics. 

It’s fascinating to listen to the often emotional post-event interviews with the athletes, whether they have won or lost: we gain an insight into the human struggles behind their superhuman achievements, and understand the highs and lows, self-discipline and sacrifices they have made to get where they are.

All this provides food for thought for forex traders: although immensely different spheres, there are many parallels between the world of elite sports and forex trading psychology. Here are some valuable insights that cross over the divide and can help you get the most from trading with instant forex funding.

Be wary of peaking too early

The eager sports competitor might shoot out of blocks like greased lightning and stream ahead of the pack, but this early lead can soon fizzle into burnout, or generate a false sense of confidence and security. 

Forex traders can also learn from this mistake: remember that it’s a long learning curve, and if you aim too high too early in the game, you are likely to become overwhelmed or be too bold and overconfident in your approach. Good forex trading is mostly about managing risk rather than making big flamboyant moves. 

Learning to embrace losses

In forex trading, learning how to handle losses well is crucial to long-term success. New traders can take losses personally, and allow themselves to become discouraged and lose motivation. However, as in sport, losses are all part and parcel of the game, and successful athletes know how to pick themselves up, learn from the experience, and try again.

The sports player will analyse their performance to understand what went wrong, and refine their strategy so that they can bounce back stronger. Forex traders also need to cultivate this kind of mental resilience to allow them to make steady progress. As in the 800m, forex trading is all about consistency over time rather than a sprint to the finish line.

Even experienced traders will continue to make losses on a fairly regular basis, but they view these simply as expenses on a business account. What is important is that you are making consistent profits and take more wins than losses over a longer period of time, such as three or six months. 

You may not be at this stage yet, so be patient and give yourself time to develop and grow your skills. Do not beat yourself up about being a failure, and do not be tempted to act recklessly in an attempt to make up for your losses. 

New traders can sometimes feel angry, anxious, or even ashamed about a bad trade, and will rush into more trades in an effort to make up for it. 

However, this will result in poorly researched trading and only perpetuate the problem. Instead, step back until you are in a more neutral state of mind, and then work out what went wrong. By treating the loss as a learning opportunity, you will not only strengthen your trading skills but also your mental fortitude. 

The power of maintaining discipline

Self-discipline is at the core of athletic achievement, and it is also a cornerstone of successful forex trading. Athletes must stick to a stringent training regime, a controlled diet, and carefully worked out performance strategies. Similarly, forex traders need to develop a daily routine to keep on top of the fast-moving forex markets.

They also need the discipline to stick to their trading plans, and not let themselves fall into emotional trading. That means not being driven by fear, greed, panic, pride and so on, but always making rational decisions that adhere to their risk management and trading strategy.

Admitting it’s OK not to be OK

Perfectionism can be the enemy of success in the sporting as well as the trading world. Even elite athletes have off days when they find it hard to drag themselves out of bed and go to the gym, or even question the point of it all. The key is to accept that you are not perfect, and it is human to have these ups and downs.

Success in forex trading comes after a long learning curve, and you need to build up your skills as an athlete builds up their physical fitness. Think about it as training for a marathon: it’s fine and even necessary to have rest days as long as you don’t completely take your eyes off the prize. 

If you are struggling with motivation, reassess your work-life balance. We all need time to spend away from our screens to mentally, emotionally and physically refresh ourselves. This is not self-indulgence; it also enables us to perform to the best of our abilities. 

Aim to exercise or get outdoors at least two or three times a week, eat a healthy balanced diet, and make sure you see family and friends on a regular basis. 

Mastering focus and concentration

The ability to maintain laser-sharp focus is crucial for sporting success, as even the tiniest of mistakes can mean the difference between a podium finish and going home empty handed. This can leave years of training in tatters, and also mean missing out on potential future earnings or prize money.

Forex traders have to get used to performing under similar amounts of pressure, and this calls for excellent concentration. Athletes often use mindfulness meditation to help them stay anchored in the present moment rather than let their mind wander to past mistakes or future possibilities that could cloud their judgement. 

Similarly, traders often use mindfulness or other meditation techniques to help them mentally prepare for a day’s trading and ensure they are not prone to distractions or a wandering mind that could lead to unnecessary risks. 

Being ready to adjust your strategy

Athletes need to constantly evolve in order to maintain their competitive edge, whether that’s learning to deal with different climates and environments, new opponents, and their own changing capabilities. Sometimes they may even need to adjust their tactics midway through a performance if it is not going the way they expected.

Traders also need to master this mental agility in order to thrive in the dynamic forex markets. Too rigid an approach can mean you miss out on opportunities, or stick to an outdated strategy that is no longer working for you. 

The market sentiment shifts in response to geopolitical events and economic conditions, and you need to be able to keep yourself well informed and be ready to respond and adapt if necessary. 

This doesn’t mean allowing yourself to be buffeted about in the breeze of every economic data release, or following the herd, but remaining vigilant and independent minded. Over time, you will hone your instincts for when it is time to pivot and when you should leave well alone. 

The importance of continuous learning and improvement

When Keely Hodgkinson won a silver medal in the 800m at the Tokyo Olympics in 2021 aged just 19, she was as proud and astonished as anyone. She said that she was unprepared to be thrust into the limelight so unexpectedly, and some of the pressure led to a period of depression.

Keely picked herself up and refocused for the next challenges. However, at the next two World Championship events in 2022 and 2023, she won silver medals: an amazing achievement by anyone’s standards, but Keely revealed that she was gutted not to have beaten her former Olympic rival from Tokyo. 

She vowed that her next medal would be gold, and through intense training and mental toughness, she achieved her dream in Paris this summer at the age of just 22. Keely’s self-belief and willingness to evolve has carried her on to greater heights.

Similarly, forex traders should recognise the importance of investing in continuous training and development to help them fulfil their potential. This will arm you with the skills to continuously adapt and set yourself up for trading success. 

The difference between success and failure for many people in a wide range of fields is
mindset, and the long-term success of traders working for proprietary firms is no exception to
this.

A golden rule of trading is that whilst anyone can hit the jackpot once, making consistent, strong
gains based on a fundamentally sound trading strategy is much more difficult, and central to that
success is the mentality you bring to the trading floor.

This does not simply mean taking a disciplined approach to following a trading plan, although
having a trading brain can certainly help in some respects.

Instead, it is about understanding how mental health and your state of mind can affect your
portfolio, how to develop your mind and your body in a way that helps build the best possible
trader, and why focusing on yourself and your needs is critical for making money.
This guide aims to provide some practical tips for developing mental fitness, as well as
explaining why it is so important to be mentally and physically ready before you take to the stock
market.

Why Does The Market Hurt Us?

Everyone has a story like this. They start the day with the intention of making some trades, so
they hit the markets and look for potential action.

After doing the research, they put together a plan of action, make some investments and make
a few small gains. This is good, positive work and on its own might make a trader feel fairly
positive.

Then one trade goes badly wrong. Maybe it was a miscalculation, maybe it was some terrible
shocking news or an announcement that did not go the way anyone expected or wanted, but
regardless of the reason it is trading at a much lower price than anyone expected.

Despite the other trades doing cumulatively well enough to offset it, that loss stings and can be
particularly distressing for a relatively new trader to the point that it can possibly cause long-
term damage to their career if they learn the wrong lessons from it.

Whilst everyone tries to trade objectively, the pressure of hitting targets, the desire to build a
portfolio and the pressure of significant amounts of money being on the line can lead to feelings
of stress and anxiety that only magnify when trades do not go your way.

Everyone reacts to these negative emotions in different ways, but it shakes your concentration
and confidence, which is not only negative now but can lead to a domino effect of bad
decisions.

How Does Mental State Affect Trading Performance?

Whilst a lot of economic models like to believe in the idea of a perfectly rational homo
economicus that always has the facts at their command and trades consistently and rationally
within the bounds of their own self-interest.

In practice, few people are like this, and not every automated trading system is completely
rational depending on the strategy it is programmed to follow.

The entire school of behavioural economics has tried to explain the specific aspects of how
psychology and the mental states of everyone who interacts with financial markets shape them
in some way, but for the most part, the ways in which mentality affects financial performance are
much easier to see.

Stress and anxiety have clear physiological, neurological and psychological effects on people,
including, but far from limited to:

● Direct and indirect effects on physical health due to the effects of cortisol, poor sleep,
lack of physical activity, poor diet and so on.
● Increasing impulsiveness and reactivity to the market. Every trade that is down for the
day can feel devastating and lead to overcorrections.
● Damaging logical reasoning and the ability to judge decisions, largely due to creating a
rather narrow approach to potential solutions.
● Creating a warped interpretation of market information and what it means, which further
affects decision-making. A tiny loss is a sign to jump off the sinking ship when it could
easily be a minute-to-minute market correction.
● Damaging self-esteem, which reduces the motivation to trade and affects the belief that
we are traders capable of making good decisions. This can lead to poor decisions and
accentuate the other four factors.
● Shortening memory and attention span. If you cannot focus when doing your due
diligence, you are more likely to invest without all the relevant facts at your command.

Most of these factors of stress affect people in other walks of life as well, but because the
pressure of trading is so high, the effects of stress are so acute that it is far more noticeable
here than it would be in other fields of life.

Everyone is guilty of falling into the trap of trading emotionally, but the best traders find ways to
ensure that they trade in a healthy, disciplined way that emphasises mental fitness.

How Do You Build Mental Fitness?

Much like physical fitness, something that can also help, mental fitness is not an innate state of
being but a toolkit of skills and exercises that when regularly practised will build into an overall
state of mind.

There are many elements that form part of the complete picture of mental fitness, but the three
most important and the ones that can be trained for the better are confidence, emotional
intelligence and mental resilience.

Confidence And Positive Self-Talk

Everyone needs a degree of confidence to succeed in any endeavour they embark upon. At the
very least, someone needs to believe they are able to learn and develop their skills to create a
foundation for success.

A secret weapon in this regard is positive self-talk, which is a consistent set of affirmations that
help to counteract the negativity that can happen during a bad day.

Bad luck can turn a good trade into a losing one, but rather than allow the corrosive idea that
you are responsible for elements outside of your control, focus on your process and method,
that you have made successful trades before with this strategy and will do so again.

Emotional Intelligence

Everyone gets emotional. That is not necessarily the issue. Where the problems come in is
when these emotions are left unchecked and unobserved. If you are mindful of your own
feelings you can notice them start to develop, how they impact your decisions and avoid
impulsive decisions.

In this regard, a trading journal is an invaluable companion. Not only is it useful for keeping track
of trades, but it also helps you understand the reasoning behind these decisions and how
successfully they worked.

Resilience

The vast majority of your decision-making when trading should not be on the platform itself. It
should be in the development of strategies and trading plans, which are robust, comprehensive
and well-researched enough to remove a lot of the stress from moment-to-moment trading.

The less you have to think, the less stressful these decisions will be, and it pays to front-load
those big decisions in a situation that is less time-critical and without the many pressures that
are associated with trading.

Trading plans are often adjusted on much slower turnaround times than an impulsive trade, and
generally only needs to be examined and altered a few times a year at most. It also includes risk
management plans so you do not have to worry at all times about being caught in a severe
losing position.

It is not completely objective, but it allows you to worry about the higher-level parts of the trading
plan when you are in the headspace to do so, rather than having to make big decisions every
time you enter and exit a position.

Healthy Body, Healthy Mind, Healthy Portfolio

Those three elements are at the core of mental fitness, but there is a lot more that goes into
building up mental fitness in trading, including improving your physical fitness.

The mind-body connection is an increasingly important part of mental health explorations. Whilst
psychology was previously considered largely siloed away from physical health, the connection
between physical activity and mental health cannot be ignored and should be harnessed to
make a better person and a better trader.

Fear and stress are mind-killers, figuratively and literally, and if regular exercises can help
reduce that stress, they remove a barrier that is in the way of your success, take away a voice
that tells you that you cannot do what you know you can, and help improve your focus.

Whilst something of a truism, regular exercise also helps improve sleep quality. Sleep
deprivation has a wide range of effects and the better your sleep, the more energy you will have
to focus on the important decisions rather than being distracted.

Beyond this, it is always best to take breaks from your trading terminal. Being hunched over a
computer is not a healthy position to keep for hours at a time.

Whether you go for a jog around the block, go to the gym or do a few stretches and have a
breather.

As well as this, avoiding processed, high-energy foods such as fizzy drinks, fast food and
sweets in huge quantities can help reduce accentuating and augmenting the stress you can feel
in certain situations.

Finally, if you are having a difficult trading day and it all feels too much, it is absolutely fine to
turn off the terminal and try again tomorrow. In many cases, the worst decision for your mental health, physical health and portfolio health is to react to bad news by making worse decisions.

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.