Forex Trading Strategies: Recognize Your Emotions and Profits

The world of Forex trading can be an exciting and heady place, but there are emotional issues you need to be aware of if you want to trade successfully. There are a number of different technical Forex trading strategies and you should be able to recognize which one is likely to best suit your needs. While forex trading gurus can teach you about the market itself, currency pairs, trading fundamentals, the use of technical indicators, and your own preferred trading strategies, at the end of the day it will be up to you which way to go. the one that best suits you.

There is an enormous amount of hype surrounding Forex trading these days, but one of the problems, which is sometimes overlooked or (in some cases unscrupulously) deliberately avoided, is the emotional aspect of trading. Many people are comfortable with the learning process involved in acquiring the basic fundamentals of technical training and learning to use the most common technical indicators. These same people are also generally comfortable with learning and, when possible, demonstrating the particular strategies being taught, while, of course, dreaming of the profits to be made. And these profits are there to be had, there is no doubt about that.

However, many of these same people will be unaware of the emotional pressure and near-panic feelings that can be encountered when you push the button on a live trade. Therefore, you need to understand the type of person you are emotionally and what type of trading strategy is best for you, to ensure that you don’t derail your trade before it gets off to a good start.

Broadly speaking, there are four main categories of Forex trading (or, indeed, general financial trading): Inter-Day, Intra-Day, Scalping, and Automatic Trading…

Trading between days or at the end of the day

Day traders place a trade on a day, which will not normally close on that day and can stay open for days, weeks or, in some extreme cases, months. Traders using this methodology should be comfortable looking at the inevitable up and down swings that will accompany each trade in the belief that the market in general will move in the particular desired direction. They will probably check the position only once or twice a day and make adjustments to the loss limits at the end of each day if necessary. Quite often, this requires a level of detachment, which more anxious traders may not be comfortable with, and similarly quite often the initial losses on these types of trades can necessarily be quite large. Seeing a trade move 100 or 200 points into a losing position before taking a profit could test the nerves and pocketbooks of many new traders.

Intraday or daily trading

Day traders place and close trades within the same day and depending on the chosen time frame, they can close trades within 30 minutes to a few hours of opening. Initial stop-losses tend to be lower than for intraday trades, but a good level of emotional control or detachment is still required, as there will be potential swings in the market during the trading time and a trade could, for example, , take an initial profit and then fall back into a losing position, before going back in the desired direction and taking profit again. The feelings of anguish when you decide to stop a trade in its losing phase (to minimize your loss) only to see it turn around and make a huge profit are not quickly forgotten!

scalp

Traders employing this strategy are looking to make a quick kill of the market, perhaps 10 -20 points, and average trading times are usually only a few minutes. The emotional advantage is that stop-losses tend to be tight and you don’t have the same amount of angst on the trade, because it will usually be short-lived. Many newcomers favor this method due to the limited financial and emotional exposure involved, and some use it as a confidence booster before attempting longer-term trading methods.

auto trading

Increasingly over the past twelve months, the markets have seen the advent of automated or robotic trading packages, in which, with the help of dedicated software, traders set parameters on their computers and trading robots automatically trade on your behalf twenty-four hours a day. five days a week. From an emotional standpoint, this completely removes the involvement and fear from the actual trading process, because you are completely free. However, you are, of course, relying entirely on the particular technology of the Robot Trading Package to place and manage trades, and therefore the effectiveness of the package itself, which for some would induce an entirely different kind of fear. and anxiety.

Understanding your own emotional makeup will help prevent you from choosing the wrong Forex trading strategy and experiencing fear, which can be potentially destructive to your early trading career. But if you pick the right one, you could be at the start of a whole new way of life.