Trading forex can be quite a lonely career, making it surprisingly difficult to master as a skill.
Who can you bounce ideas off of? Where can you find a mentor, someone to lend a helping hand if needed? Do you have someone you can discuss your trading performance with?
Underestimating the impact of this aspect of trading is, from what I have seen, a large factor for most traders giving up on forex.
Asking questions like “What are the downsides of trading for myself?” and “What can I do to erase the negative effects?” are important in developing yourself as a trader.
Once you understand what the potential downsides are, you can then respond to minimize their impact. With this article, that is exactly what we are going to try and achieve!
Effects of Trading Solo
We have all heard the benefits of trading independently and finding financial freedom.
You can be your own boss. Work less but make more. Work from anywhere in the world with an internet connection.
But what is often overlooked are the downsides of trading solo. If you aren’t aware of the negatives, how can you possibly expect yourself to prevent them?
Trading in isolation is difficult to do successfully because traders don’t know what speed bumps to look out for.
Let’s take a look at the negative effects of trading forex solo…
1. One Perspective
Whenever you do any work, an activity – almost anything really – it always helps to have someone else looking at the same thing as you. With forex trading, you are largely looking at your charts from one perspective: your own.
Without another perspective you don’t gain any additional insight, no differing opinions, and you don’t have someone else’s read of a situation. These are all incredibly valuable as we can’t possibly expect ourselves to see all the different angles that you can approach trading from.
One trader may see an entry signal where another sees multiple reasons not to enter. With no back and forth, no dialogue with anyone, you are not reaching your full potential.
This limits our trading and, more importantly, it slows our growth.
2. Bias
We are all subject to our own bias whether we know it or not. When it comes to trading, it’s no different.
Your bias will be influenced by a number of factors: how well you’ve been trading, how often you’ve been trading, what types of setups you’ve found success with, to name just a few.
This is where problems like chasing trades, fear of missing out, patience, greed all come into play. Your bias can cause these negative aspects of trading to grow and have a larger impact on your trading career.
It is difficult to get out of your own head space in this way. Objective analysis is the best type of analysis in forex trading. Your bias will do what it can to make that not happen!
3. Cognitive Distortions
This is a fancy term for effectively saying that your negative thoughts will build on themselves to create even more negative thoughts, or increase their intensity.
My psychology course will be updated this year with a thorough breakdown of how cognitive distortions affect your trading and what you can do to prevent them.
One example of a cognitive distortion is ‘catastrophizing’.
Let’s say you are on a losing streak for 6 trades…
With this cognitive distortion: you will look at those 6 trades, declare yourself a failure at trading, and ultimately quit. If this sounds like a rash decision to you, that’s because it is.
Cognitive distortions change your mindset and emphasize negative thoughts to the point that you come to illogical conclusions.
I don’t need to tell you how badly this will impact your trading, especially with the other negative effects of trading forex alone piled on top.
4. Self-motivation
This last hurdle is entirely dependent on you and it may not ever be a problem for you. However, the reality is that some people are better self motivators than others.
Forex trading requires you to be strict with yourself. There is a level of discipline you need in order to succeed.
That’s why you always see me wearing that shirt which says “Discipline Equals Freedom”. This is a mantra I strongly believe in when it comes to trading.
If you find yourself struggling with self motivation then you must make it a priority to work on this aspect of your trading.
You can only succeed to the level that you give yourself the opportunity to reach.
All of these negative impacts of trading solo can build on one another to create some pretty serious barrier to success. If you don’t pay attention they could very likely become the reason for your trading career’s premature end.
So what can we do to combat all of this…
Accountability to Create Dependability
This is no doubt one of the best tricks in the book, yet also one of the hardest to actually pull off.
Accountability.
Holding yourself accountable to someone else. What does this actually consist of though?
Showing someone your trading journal (check out my new 2019 Trade Tracker), discussing your previous week of trading. This is the easiest and the minimum accountability you should have.
It can be someone that doesn’t have any experience in trading too.
This will put you in a position to explain concepts and strategies which helps accelerate your learning. After all, if you can’t explain a concept in simple terms, you don’t understand it enough!
This single step will counteract all of the negative aspects of trading forex solo listed above.
You can be accountable in a few different ways though:
- Trading social media platforms (TradingView)
- Your partner, family, or a close friend (most common)
- Join a trading community (like forex4noobs!)
Choosing someone who is close to you as your accountability buddy is the easiest of the options. If you are shy it is definitely a good first step.
Overtime, you can participate in a trading community or on trading social media. Don’t feel you have to rush into these though, you can give yourself some time to adjust.
The reason that accountability is the answer for these negative side effects of trading solo is due to the fact that you are inviting someone else to look at your work. This acts as a literal block to a number of things.
It makes you honest, first of all. If you had a bad week, be honest about that. It will relieve some of the pressure you will undoubtedly have put on yourself.
Relieving pressure in this way benefits us greatly. It helps us to maintain objectivity, it gives us more mental stamina, prevents you from lying to yourself, and it gives someone the opportunity to support you in your trading career.
That support can directly aid cognitive distortions and your self motivation.
Another person quite literally brings another perspective to your decisions. This also has a knock-on effect of your bias being checked.
So through accountability you can create dependability toward yourself and your trading. Having a strong, confident head space around your trading is going to play a big role in finding success.
We want to generate confidence in your own analysis so that you can be that independent trading force.
So find someone, or a community, to be accountable toward and you will be doing yourself a huge favor!