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.