3 Techniques for Fighting Forex Fear

how not to handle a bad

You spot a great GBP/USD trade set up. You check ForexFactory to see if any news is due out. You confirm your analysis and remind yourself of your money management rules. Finally, you go back to your platform and take a short.

You are targeting 40 pips and almost immediately your trade goes into profit.

+5 pip – You feel that little tingle of excitement you get when you’re in a winning trade.
+10 Pips – That excitement grows.
+20 Pips – “I’m half way there” you say to yourself. You can feel the blood coursing through your veins.
+ 30 Pips – “Yeah only 10 pips to go” you’re really happy now, this trade is almost over.
– 15 Pips – “What? Nooooo, why are you reversing?”

Sound a little familiar? Most of us have been here. At this point, it is easy to get nervous and bail out of your trade, only to have it hit your 40 pip target 20 min after you exit. Then leaving you feeling rubbish because you got 30 pips less than you should have.

This is a very common mistake and it all comes down to fear and nervousness. As a newbie, it is very easy to get scared when in a trade. I know this because it used to happen to me too. I had a chronic case of Forex Jitters. As a newbie, there were many times when I would exit a trade with only 10 pips when I was targeting 70 or more pips.

So I had to put a serious plan in place, to fight fear, while I traded otherwise I knew I would end up as part of the 90% who fail in Forex. Here is how I overcame my fear.

Three simple techniques for fighting fear in Forex

Step Away From the Trade

The very first step I took was a backwards one. I realised pretty quickly that one of the biggest causes of in-trade fear was pip counting. I used to watch every pip movement like a hawk. Just as above, I would become ecstatic as the price moved in my direction and I would freak out as soon as it reversed.

For this reason, I decided my best bet was to step away from my charts after taking a trade. So upon taking a trade, I began to set alarms 5-10 pips before my stop loss and target price. I would then step away from my computer and go do something else. Either read a book or move to my second computer and play a computer game.

This disconnection, between me and my trade, did wonders for my trading. I was able to consistently hit my targets and remove all the stress of watching pip by pip.

As time went by, I became comfortable in my analysis and my method as it was making consistent profit. I was then able to start actively managing my trades with a new level of confidence, I had previously lacked.

Trading to Trade

Newbie traders tend to have an insane urge to jump into a trade just because they feel they need to be in the market. They think to themselves, ‘a traders job is to trade so I have to take a trade to today’. I know this because I spent the first 6 months of my trading career doing this. I would trade just because I thought I needed to be in the market.

This means I would go into a trade without a plan or strategy. I would go in blind and if the trade went negative I would freak out. The way I solved this was by writing three questions into my plan and asking myself those questions, before I entered any trade.

1. Have I done my analysis and do I have valid reasons to believe this trade will work out?
2. Does this trade fall within the guidelines set out in my trading plan and method?
3. At what levels are my first target and my stop loss?

If I answered no to any of these three questions I would not enter the trade. This gave all my trades structure and ensured that they were real trades. As long as I asked myself these three questions I would no longer rush in blind, by taking a trade just for the sake of trading.

Picked a Single Pair

When I first started trading, I watched five to six pairs every day. This made it very hard for me to become familiar with any one pair. Now that I have been trading Forex for six years I have built up a certain degree of familiarity with several pairs. When I enter a GBP/JPY trade I expect to be in for a bumpy ride; down 20 pips and up 10 pips, down 30 pips and back up 40 pips. If I enter EUR/USD I know to expect my trade to move into profit at a slow trickle. I also expect some minor support or resistance at every psychosocial level.

This familiarity removes much of the fear I would have had previously while trading. If I know that GBP/JPY could be in profit 40 pips and in seconds reverse 20 pips I am not as surprised or shocked when it happens.

So the answer was simple. I limited myself to trading a single pair. Once I became familiar with that pair I added another pair and then another. Starting off with a single pair allowed me to become familiar with that pair.

Are You Going to Use These Tips?

Do you suffer from Forex Fear? If so, are you going to implement any of these techniques? I would love to hear your opinion so please leave a comment below. Also, if you have any other fear busting techniques share them by leaving a comment.

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31 thoughts on “3 Techniques for Fighting Forex Fear
  1. Sounds very familiar. It’s very tempting to go monitor the trade on a 15m chart, and I’ve left trades a couple of times just before it would turn profitable again..

  2. Totally agree with all of the above Nick, taken similar steps, imagine myself as a snipper and let the price come to me, as soon as its in my sights, enter without hesitation, getting there.
    As soon as I enter the trade, walk away, make a coffee, have an evil fag (must give up).
    Also have a multi lot strategy, 1 lot off to secure break even if SL is hit, pressure is really off at this point. Another off at last point of price reaction (highs/lows), lock in BE last lot, finally leave last lot to run to target. Works wonders, also I used to watch every tick, Nick is right, just do something else, my best trades are when I preset the levels and dissapear for a few hours!

  3. I used to be a real victim of “panic closing” , especially after I’d wrecked an account through breaking my own rules.
    Not being able to hedge anymore added to the fear.
    I managed to quell that fear by reducing the size of my trades so I wouldn’t crucify myself if the trade tanked,… so I could go make a coffee without running back to the screen every 10 seconds, or answer the door without imagining all kinds of ‘Murphy’s Law” heck breaking loose in my trade, while I’m not looking. Yes, I don’t make as much on my trades, Yes, I still close stuff that truly appears to be losing, but I also am able to wait it out and don’t get hypertension from looking at a chart, anymore.
    It may take me a lot longer to reach my financial goals this way, but, 1. I obviously don’t feel confident with my trading style yet, (hence, should not expect to make any great strides monetarily) and 2. As I become more sure of my analysis, I will eventually be able to increase the lot size without being so skittish.
    Thanks for this post, Nick. Sometimes I think you’re reading my mind.

    1. @Jude:
      That is definitely another way to reduce the fear. Thanks for that Jude I should have added it to the original article.

  4. newbie here, i had that panic attack several times and closed positions in red numbers to see later i could get some profit if stayed with the open position, i really thank you for the tips you give us here, im starting to follow almost every advice you give. im becoming a better trader. THANKS FOR ALL YOUR HELP, LOVE http://www.forex4noobs.com

  5. I do like the first tip especially, though the 3-question one will sure help noobs as well but that’s already covered by your great course about making a plan.

    Funny how almost everybody recognizes this experience, makes it almost normal behaviour to shout price action into profit pip-by-pip.
    But stepping away by setting alarms UNTIL confidence settles in does make a lot of sense. It also forces you to only take trades you dare to walk away from ie conform to your plan.

    I feel some some extra BlackOps play time comin’up ;)

    @Jude: Also a very sensible option, worth considering, thnx

  6. Thanks for super advise,if I get indecision candle on the 4hr near resistance. I switch I to 1hour and draw a trend and watch to see if it respects trend line will stay in previous buy stop setup until resistance is broken on the 4hr chart,also have MC indicator visible only on the 1 hour chart,find that it can influence your decision negatively, the 200DayDailyRange only visible on the monthly chart on to work out stop and take profit.
    Thanks for a super site very interesting and informative
    Best regards
    Richard60

  7. Wow how many of us during our first formative steps at learning forex has not experienced this scenario Nick, quite a few I would imagine. It’s all part of the game plan that must be diligently controlled. Only discipline and good risk management pulls us through. I can particularly relate to the incessant need to to have a trade active on the platform. It’s like if I wasn’t in, I wasn’t in so to speak. Having said that I have learn’t the hard way (which is usually financially) that there has never been a correlation between trading constantly and success, it boils down to quality rather than quantity.

    Thank you for your advice to all Nick.

  8. Man on man, this is the best advise for me at perfect time… You’re surely reading our minds… I feel the same way when I’m in the trade with ‘Big Money’. Believe me, 80 percent of time I win the battle when I’m not looking at chart…. I usually go outside hang with my friends…

    1. @Asif:
      Good for you man. That means your analysis and method are solid. Once you get a proper handle on the psychological stuff you will probably be a consistently profitable trader. Keep it up!

  9. Just as a dog bite would strike fear into a child about any dog that approaches it, friendly or otherwise, so we once bitten by the market face an irrational fear of the markets that actually provide regular opportunities for us to be winners and make money. With a defined strategy, high probability set-ups, good Risk/Reward, good Money Management, what is there to fear from the market….?

    Great post Nick, fear – part of our natutral protective psychological system – must be the principal reason for most traders failing. It is then a vicious cicle as losing traders grow in fear of the markets.

    My whole objective for 2011 (and beynd) is to built a new mindset about the markets and hopefully one day trade without fear. The tips provided are good and I especially agree with not trying to screen-stare a trade to completion, the mind plays amazing tricks with the emotions…

    Doug

    1. @Doug:
      Hope you meet your objective. I like the dog bite analogy and I agree with what you say about not having anything to fear if you do everything right. The problem is most newbies make such fundamental mistakes that they build up that irrational fear.

  10. Once you get past closing out of a trade because of fear ; managing trades you are in can help you either lock in more profits than planned &/or closing out more trades at a profit.

  11. Thank you as always for this brilliant advice. I have seen so many trades that were profitable end up negative and then turn and go my way. I stopped watching multiple pairs and now only concentrate on two. It has calmed me down as I spent so much time flipping between charts that I’d miss opportunities while flipping. Now watching only two I have seen a big difference in my trading and general calmness.

    I have also learned that when I reach my daily target or get close to it to not trade anymore that day. This is a discipline I learned from day one and am grateful I’m still sticking with it. Thankfully I’ve never been guilty of over-trading but I put that down to fear and giving back my profits :) I tend to wait for perfect setups which leaves me days where I don’t trade. This caused big frustration to start with but it’s paying off. My win rate now is greater than my losses.

    I’ve also stopped setting financial targets and told myself this is like a college degree and I can’t expect to make big bucks until I know my trade. So what if it takes 3 to 5 years my long term goal is to make this my income. There is no prize for the winner.

    I am also more relaxed when I take a trade with two lots and close the one in profit and move to Break Even. After that what happens is jam. Trading on only one lot makes me very skittish.

    Another big downer for me was being in trading rooms and doubting my analysis because someone will say something and it will stop me taking my trade. I also find one needs to focus and its hard to do when there is this constant chatter. So now when I trade I withdraw into myself and once done will chat to my trading friends online.

    Thank you to Nick and all the above comments for the advice.

    1. @db-trader:
      That’s funny because in the Forex4Noobs chatroom we all tend to agree on direction 90% of the time. We each analyse the market in our own way but we almost always come to the same conclusion. It actually give me a lot more confidence know that other people are thinking the same thing I am.

  12. Fully agree with everything. What surprises me no end is that no one ever includes the USDollar within the scope of their anxieties. It’s always pips up & pips down. For me it’s which way the Dollar turns, it will turn the best chart upside down at will.
    Everyone else good luck with your pip trading! Make a chart, like it a lot, go away & come back to collect. Wish it was as simple as that.

    Alf

    1. @Alf:
      It is never that simple. However, I find that stitching together a lot of simple techniques ends up having a positive impact on your trading.

  13. Great advice. Especially ” playing a video game” while waiting for the alarms. I will definately give this a go. And I won’t irritate my wife by playing games when she thinks i should be giving her all my attention.

    1. @shaun:
      Hahaha I have been playing game all week and my girlfriend keeps telling me she doesn’t mind. I know she does though and she will bring it up next time we argue.

  14. I trade in the 10s timeframe. But it is very much as you say, no difference other than the timeframe. I trade only 1 pair (EUR/USD). With each potential trade, a judgement would be made based on various criteria. Profit target and stop loss (i.e. the level when price would hit and confirm that my idea was wrong).

    The other difference would be my profit target, which would usually be 10times smaller than what you target, as would be my stop loss. But i do watch the price movement, not for the pip to pip, but for the price action, like higher high, or lower lows, to double confirm on my trade.

  15. Now when I take trades i am also looking for the ‘how soon till i get to break even factor’

    i wait until the trade has started moving fast in my direction and get in during the momentum moving my sl to break even very fast. I then let the trade run, sometime i can be at breakeven within an hour, by doing that i am acknowledging the trading anxiety i feel and taking steps to alleviate it by going for fast breakeven trades, how many businesses let you be at breakeven so fast, that’s one of the reasons i love trading.