Forex day trading isn’t necessarily easy. Sure, its tempting to think it is – and many brokers keen to make a killing dealing you currency at a price different from what they paid for it, will actively promote this idea.
But one thing you’ll hardly ever read about is the importance and impact of psychology and emotions on trading success. Yet, ask most experienced traders, and they will say it is the most important aspect of successful forex day trading.
Why is it so important? Well, let us think about the worst trade anybody ever makes. You know the one – its the same each time, hanging on until the bitter end, moving your stop-loss lower and lower, hoping and pleading with the market to have mercy on you.
Why did you do that? Often it is because of a simple thing that happened… you got into the trade, and it went well. It went well immediately – straight away you saw a profit. You felt great! How fantastic to have made such a good trade, and you just didn’t want to let that feeling go – so you held on longer and longer, hoping things would get better and better. Then, when they didn’t, all that joy turned into anger, sadness, fear and regret. With all those out of control emotions dragging you down you just rode that trade all the way until you nearly busted your account.
This is the danger of premature happiness. If left unchecked it will lead to its opposites, and these will exert their influence over your better judgement and ruin the objectivity of your trading and undermine your discipline to stick to your trading strategy. Any experienced trader knows that the only time you can afford to feel happy is after you close a trade. That’s actually the only time it is realistic and makes any sense. That is the only time you actually have the profit. Feeling happy at any other time can only be a recipe for disaster.