Trading the Forex market from the comfort of your home computer chair can offer a huge amount of freedom, a nice secondary income stream, and when it’s done wrong – enough stress to turn your heart inside out.
Forex trading is an educational, psychological and personal journey. Everyone is on their own private quest to reach the ultimate ‘end game’ – becoming a full time trader.
Is your journey going to be filled with sleepless nights, a constantly churned up stomach, and just making you not a nice person to be around?
Will you even make it as a Forex trader? Or, will you become your own worst enemy, allowing common trading behaviors to amp up your stress to palm sweating levels – killing off any chance you had of fulfilling your Forex dream.
Today’s article is a really important one – I am going look over what I believe are the most common causes for excessive Forex trading stress.
It’s time to stop reaching for the anti-depressants, re-gain your integrity & clarity, and put a stop to the self-sabotage behaviors that cause the unnecessary damage in your Forex trading, and to your health.
Taking On Too Much Risk
Taking on too much risk, is the greatest catalyst to trading-related stress.
It doesn’t matter if you’re a newbie, or an experienced trader with a good trading record – the thought of losing a sizable chunk of capital and going through draw down will flare up dangerous emotions. This is common knowledge for most traders, yet there are still a lot of people biting off more risk than they can mentally deal with. Why?
- External Financial Pressure
- Lack of Patience
Traders will switch on their high risk gambling mentality for ‘quick fix results’. Gaining the willpower to change this behavior is the one of the single most effective things you can do for better long-term success and viability.
Have you ever heard that inner voice telling you, “this trade is just too good, I could make a fortune!” – so you pump up the trade risk. Or, maybe you just think you’re the worlds best market analyst at the time and your cocky attitude fuels you to risk more than you should – you truly believe your trading decision can’t produce a negative outcome.
Whatever the reason is, your trading train has derailed, and you’re trying moving forward without the support of your trading system or risk management plan.
There are a surprising number of traders out there who really don’t know how to calculate their risk before making a trade. These are the ‘lot size guestimaters!’
Are you a lot size guestimator? If so – you really need to learn how to calculate your position size so you know exactly how much you’re risking.
In our Forex trading course, we’ve dedicated a whole chapter to explaining lot size calculations. We’ve even gone a step further and now offer a free MT4 money management expert adviser to all War Room Traders – which makes calculating risk, and trade execution as easy as clicking 1 button.
It’s your responsibility as a trader to become an expert risk manager. You should focus on becoming a wizard at lot size calculations and thrive to be the best at risk management as you can be!
If you find that you are experiencing anxiety when a trade goes wrong (a sickening feeling in your stomach, sweating, increased heart rate, panic, etc.) – then that’s probably a giant red flag telling you, that you should decrease your risk.
Ask yourself, ‘what amount of money’ is allowed by my risk management plan, and not put me in stupid draw-down if the trade was lost. You’ve got to be honest with yourself, because you’re in the captain’s chair and all responsibility, and accountability falls back on you and you alone.
Like I mentioned before – Forex trading is not only about making as much money as you can in the shortest period of time, it’s a journey of personal improvement. Some people can stomach large amounts of risk, others can’t, but learn how to as they clock up more trading experience.
If you’re getting panic attacks from trading, it’s a warning sign that you’re doing something wrong. The first way to deal with stress is to acknowledge it, isolate the cause and remedy the situation!
Traders who are on top of their risk management, sleep easy at night.
Over trading has got to be one of the most common reasons for Forex trading failure. Traders will overexpose their account by getting caught up in the excitement of the markets and open multiple trades at once.
Over trading usually gets out of control really quickly – “another position won’t hurt… can it”?
Some traders also might find themselves being in too many positions because they build up a fear of ‘missing out’ – It’s a poisonous way to think.
If this is you – write down on a piece of paper in your own words that the market is forever, and there will always be another (and probably better) trading opportunity around the corner. Stick it up somewhere near your trading desk and look at it every time you feel like you have to take a trade because you feel like it is some sort of opportunity that won’t come again.
A lot of traders like to hang out on the lower time frames, which exposes them to increased temptation to trade more.
Candlestick signals which are the basis for most trading decisions, carry much less weight in the lower time frames due to the “noise” and general fluctuations. Think of a really noisy phone line – you can sort of hear what’s coming through, but it’s hard to get that clarity you need.
Many traders are brainwashed to believe really low time frames are the prime ‘hunting grounds’ for high quality signals, and are ready to pull the trigger… of a trade execution machine gun, rather than the kill shot of an accurate rifle. Even after entering a trade, most traders will continually monitoring these minor price movements, conditioning them to impulsive, careless trading.
To be honest, I think having more than two trades open is excessive. Think of all the times you’ve opened 3 or more trades and walked away from it all as a winner – honestly it’s not that many times is it… and it is STRESSFUL!
Profitable trading requires constant discipline to identify and take advantage of only the best trading opportunities. If you find yourself opening multiple positions all the time – try adding this rule to your trading plan…
*** Only one trade is allowed to be open (with risk exposure) at any time. ***
This rule means if you have a trade open, and the stop loss has not been adjusted to at least break even, then you’re not allowed to open any more positions. That doesn’t mean you should start moving your stop to break even the first chance you get, just so you can open more positions. I only ever move my stop if my trade has extended into good profit, and I feel can survive a trend correction without being taken out out.
If you can actually apply yourself and stick to a rule like this – you will always be looking for the “best trading opportunity”; I do believe focusing on one trade at a time will help you trade less, but make more.
When you have several trades going at once, not only are you likely to be risking too much, but you have more things can go wrong.
Traders should always think in worse case scenario. What if you risked 2% each on five trades going simultaneously, and then you have four losers and only one winner? You’ve just lost 8% on those 4 trades. This is a very common scenario because trades opened around the same time are generally highly correlated – when one goes down the rest usually do too.
Are you thinking worse case scenario? Have you got too much risk exposure where you feel like you need to keep checking your account and “micro manage” the situation. It’s not healthy, think about the big picture – trade less frequently, aim for higher risk reward targets and make more.
Trading with money that isn’t yours
When traders discover Forex and are pumped with the ‘unlimited profit potential’ marketing out there, they want to start trading ASAP. Urgency and desperation kick in and they start looking for solutions to get their accounts funded up quickly.
Desperate traders usually source quick money from:
- Personal Loans
- Credit Cards
- Mortgage Extensions
- Money Needed for Living Costs
- Loan Sharks
- Borrowing Money Off Other People
Looking over this list should send shivers down your spine when you think about the risks here. Obviously putting yourself in debt to trade Forex is highly inadvisable. Trading with money that you don’t really own in the first place is already going to put you in an extra stressful situation.
When friends and family find out you’re into Forex trading and even making some money off it, they may be keen to invest in you.
It may be tempting to take their money and trade with it, but take my advice here – it’s a bad idea for two reasons. Years ago I accepted $40,000 of my friend’s savings to invest in Forex. His business wasn’t doing well and he wanted to put his money somewhere where he could get some good returns.
I felt sorry for him, wanted to help out. I thought I could handle it – but boy was I wrong.
By taking on the responsibility of his life savings, my Forex trading experience completely changed. I found things I was doing normally, SUPER stressful. I couldn’t take my mind off the markets when I had trades open, suffered anxiety through the day, and had trouble getting a good night sleep. I wasn’t doing anything reckless – it was my good friends money and if something went wrong and I lost it I wouldn’t be able to live with myself.
The stress really got to me.
Imagine if I had a CHF trade open with his life savings on the line, and the SNB pulled their move at that point in time. I would have ruined my relationship with him, which is my second reason not to accept borrowed money to trade with.
People who give you money, and don’t really understand Forex trading will have very very very high expectations of you – if you don’t perform to their expectations things can get nasty.
I returned his money to him without loss or incident and left it at that. Moral of the story, only trade with your own money – no matter how good you think you are. Trading someone else’s money who doesn’t understand FOREX is a hard lesson you don’t want to learn.
Too Much Screen Time
I know a lot of traders, especially new traders, have a tendency to spend far too much time looking at their charts and watching their trades.
Don’t stare at the charts, this leads you to be likely to react “in the moment,” based on the emotions you are feeling and not on the validity of the trade in the first place.
If you find yourself feeling stressed out over your trades, definitely remove yourself from your screen (preferably go somewhere where there is no access to the trade terminal).
This includes trading apps for your phone! You need to resist the temptation and give yourself a break from trading entirely. So, if you find that your mobile app is not helping and tempting you to make poor decisions, it may be best for you to just remove it.
Personally I don’t see the value in many Forex mobile apps. It’s difficult to get proper clarity from a mobile screen.
A change of scenery is often helpful to de-stress from trading. Whether you go for a jog or read a book; focusing on something else for a little while can be helpful in putting yourself back into the proper state of mind. Try an activity that will put you into a positive mood, such as watching a good movie or hanging out with friends. Try to surround yourself with positive people.
Whatever you do, don’t micromanage your trades.
If you are sitting there staring at the charts, you’re going to feel compelled to “do something.” I believe in a ‘set, forget, and collect approach’. You analyze your opportunities, choose one, choose the entry, exit and stop, and then walk away and let it play out without interference.
Once the decision is made, go out and live life!
Unhealthy Lifestyle Choices
The nature of trading has one sitting in the same place all day, doing very little aside from using their brains. So, it is really important to counterbalance that with some physical activity.
Make sure that you are getting sufficient sleep and keeping a fairly consistent schedule.
It’s not good for your body to constantly be swinging your sleep schedule around and to not get enough sleep in general. If you are operating on too little sleep, you’re going to make more mistakes and bad decisions.
And of course, try to eat as healthy as possible.
Your body is like a machine, and it will operate best when it’s fed the best fuel, gets enough rest, and isn’t surviving just off energy drinks. If you keep these three things in mind, your trading and your body will thank you!
Using A Stressful Trading System
Forex trading stress can easily come from traders who don’t understand the nature of their own trading system. Generally they’ve picked it up off some Forex forum, where some trader has mashed a whole bunch of exotic indicators together and explains trades should be taken when indicators A,B,C cross over each other while being confirmed by indicators X,Y,Z.
These kind of systems looks really ‘flash’, but don’t really make sense when you look into them. This can be very confusing and really stresses the trader out, because ultimately they’ve got no idea of what’s going on.
The more complex your trading system is, the more complicated every decision you make has to be. I strongly believe that traders achieve better results by keeping things simple. Thats why we use price action strategies, focusing on the important points of the markets like support/resistance, mean value analysis and effective candlestick signals.
It doesn’t get much simpler than that!
Living under the constant burden of stress can literally stop us in our tracks. Some people resort to avoiding or abandoning their responsibilities altogether or engaging in self-destructive behaviors if it becomes too overwhelming, so it is important to nail down our stress triggers and find solutions that we can realistically work in to our lives.
If you’re looking for a Forex trading system that is straightforward, offers clarity in your market analysis and just downright simple and effective – you’re probably going to be very interested in price action trading strategies. Feel free to stop by our War Room Information page, our war room contains one of the most comprehensive price action trading courses!
I hope that this article has been an eye opener, or a kick up the ass at least, and encourages you to move forward with a more productive and satisfying trading experience.
Remember, stress in trading is mainly driven by our behaviors and from being unable to control the market. We cannot control the market, but we can control our behaviors and our reactions to it!
Cheers and good luck on the charts.
Noted that I have done all the negatives of what you mentioned. Time to change my trading strategy .
Thanks you so much
Your writing style is great – solid, clean and wise content. Thank you very much!
I just started studying trading 6 months ago and now ready to go live, starting small. I’m *this close* to joining the War Room! After looking through a lot of different Forex resources over 6 months, I’ve been most impressed with your content and style. I especially like how you manage the trades on your youtube vids.
Guilty to all charges, driven by greed and so call magical Indicators that promise to makes me a millionaire in a very short time, what an idiot I was not to mention wasting time and $$$$ attending courses. Thank you Mr Wood for kicking my arse, I’ve learn more in your article than the whole 2 years of learning forex trading, I realised now that understanding of Price Action is the correct way of forex trading. Thanks
Today I have reread this articles,, I feeling of guilty for my self,,,i always overtrade, still can’t control myself ,this week I have 3 losing trade, and drawdown 20% of my acc…yes..now I understand what a U talking (is one trade only be allowed open). From today ..i must fully follow U guide to help me to improve my self …
Thanks again ..
I was pretty guilty of these mistakes but I am way better now. Although I still use one or two indicators but only on D1 times frames and H4 for better entry price. I can’t remember when last I saw a H1 chart on my screen and I’m doing just good. My secretes are: 1. One trade at a go, but at breakeven, I may take another trade. 2. After a loser I take 1 week off my chart to hangout with friends and family. 3 After a winner, I buy someone (Either Myself, Wife, Son, Father e.tc) a gift. 4 . I don’t looks at my chart when I’m under the influence of alcohol. 5. I pay more attentions to my daily hustle (Solar/Inverter backup installation) and only check my chart at the NY close.
Trading can be the best thing that will ever happen to you if you learn to respect the market and not force it. Good signals almost scream at you when they are present and the market only does the same thing over and over again but over a span of time.
Thanks for taking out time to lecture us Mr. The Forex Guy. Cheers!
Looking forward to your next article!
Replying to: Lakeside
Extremely helpful tips that other people could follow. Good signals do scream out, but patience to wait for them is the challenge.
great article , the hardest part I find in trading is the emotions,temptations, witch I am working on and I must admit , getting better all the time. How ever it takes time, patience , and lots of screen time to
eventually grasp the way Forex works.thanks a lot.
Indeed a very well written article, summarizes the crucial points properly. Especially liked that you mentioned the unhealthy lifestyle choices. Many trader (including my earlier self) don’t realize that what happens when you are not trading matters just as much when you do. If you struggle emotionally or physically, then you probably can’t keep your head clean which affects your trading negatively.
Of course, things can go wrong if you don’t commit the above mentioned mistakes, since there are so many factors that impact trading success. One of such factors is for example the improper broker choice. This is crucial because the broker you choose strongly influences your ability to make profit. Several traders have to switch their brokers because they pick a broker that doesn’t fit them.
Also, many traders fall for catchy advertisements and that determines their broker choice. It’s true that some brokers have tempting offers but it’s not always what it seems. Some of them take advantage of retail traders and they apply lot of re-quotes or hidden costs and these also hinder traders from making good money.
I have a quite deep experience regarding this topic which I think would useful for other traders, and I’d be happy to share my insights with the The Forex Guy community. If you’d be interested in some kind collaboration, let’s contact each other.
Replying to: Peter
What you guys are saying make a lot of sense to me. Once I start trading I hardly move away from my desk and become tempted to take many small profits too early which gets wiped out with one loss.
I am also struggling to find brokers with lowest spread as low as 1 pip or less without commission. Can you recommend one? I also want brokers who do not trade. How can I find them?
These are real trues that are hard to stick on ones brain, when I am relax usually I fish more pips
wow… i used to commit some of the reasons you mention…. i still do… 🙂 great post…..