Is OCD Killing your Chances for Forex Success?

Forex OCDEver felt like there have been obsessive tendencies in your trading that may be blocking you from reaching a level of success in the Forex Markets?

Or, maybe OCD patterns in your Forex trading have started to affect your daily life.

Trading psychology plays a game chaining role regarding success with trading.

It should come as no surprise that the psychological events that affect people in their mundane lives will also trickle down in their trading behavior and approach to the markets.

It is the psychological component that will either make you or break you as a Forex trader.

Obsessive-compulsive disorder (OCD) is a type of anxiety disorder.

It is characterized as having unreasonable thoughts and fears (obsessions) that lead you into doing repetitive behaviors (compulsions). Moreover, it is possible to have either obsessions or compulsions and still be regarded as someone who sufferers with OCD. It causes severe anxiety that can certainly get in the way of your daily life.

I’ve lost count of Forex traders who I’ve seen demonstrating the symptoms of obsessive compulsive disorder – could you be one of them? Let’s face it – we’ve all had our moments where we have been obsessed with the markets.

In this article we’re going to have a look at some of the signs you may be a little too obsessed with your Forex trading, and could be ruining your chances for success.

 

OCD Tendency #1 – Having to be right all the time

always right memeAre you one of those traders who must be right all the time?

As a trader, you will balk at taking no for an answer.

Whenever the direction of a trade goes against your liking, you will quickly point the finger at the market OR hold a grudge against your broker; blaming them for your own short comings.

The scary thing is you will never admit this or even be aware of this fact.

Being a Forex trader, you must accept the fact that “losing” is part and parcel of the Forex trading business, or any business for that matter.

If you think otherwise then you are likely to fall to the whim of “revenge trading” where your losses can soar and cripple your account size.

Furthermore, there are some traders who think that it is unnecessary to place stop losses on their trades and thus end up holding onto losing trades.

They do this simply because of arrogance and the notion that they cannot accept any loss. Perhaps they feel an underlying sense of insecurity and can draw a parallel between losing trades and a lack of intelligence?

If you can identify yourself with the type of trader mentioned above, then you should know that trading is not an IQ test. You don’t have to get everything right, and no one is here to judge you.

If a particular trade setup has a 70% chance of succeeding, that doesn’t necessarily mean that the next one will be a winner – hence the importance of understanding the market is a system based on probabilities where you need to focus more on money management and risk to reward ratios.

Most traders, including myself have a stop out rate of over 50% but still manage to keep ahead with positive geared money management.

Most of my winnings come from a minority of traders which I hold for longer periods, like 1 month+.

Legendary trader & the original turtle, Richard Dennis got 95% of his trades wrong and yet managed to amass a fortune and a trading record that has been the envy of the trading world.

How did he do that? Well simply because the remaining 5% if his trades were absolute monsters! So, there is absolutely no need to be right all the time. I know keeping this mind set can be tough, but you must be aware and try to fight this thought every time you get it.

Summary

A lot of traders can’t accept they might be wrong, and blame other things like the market or their broker for a trade failing. Forex is a system of probabilities, which means even the best looking trade has the chance to fail. The key to make probabilities work for you is to use positive geared money management.

 

OCD Tendency #2 – Trying to understand everything

too much info ForexAnother classic OCD ‘warning sign’ from Forex traders are the ones who attempt to understand every little aspect of the Forex markets.

For instance, those traders who study: economic data, market fundamentals, and apply various indicators across multiple time frames – all of which they believe will give them some sort of valuable edge, or insight about future price movements..

External variables, like economic data and indicators, are notorious for giving conflicting signals at any given point in time.

The more you try to understand, the more you will come across ‘internal conflicts’ in your own analysis. Therefore paying heed to all that information out there is going to lead to confusion, and ultimately poor trading results.

If you haven’t already, then it is high time that you stop trading Forex news releases, stop trying to look for that golden indicator crossover strategy, and never put the reins of your trading account in the hands of some shady trading robot!

Instead, focus on what price is telling you!

Focus on the candlesticks, and don’t look any further than your Forex chart.

By learning price action trading, you will be able to read the real script of what is going on behind the scenes. You will really understand the dynamics of market psychology and why price behaves the way it does – you will never look back.

trying to understand all of forex

The temptation to ‘understanding everything’ will never be there again because you will have the most important and pressing information in front of you – the price action behavior itself, which is the ultimate leading indicator.

Summary

Some traders believe they can gain the unfair advantage by studying, and keeping up with literally every aspect of Forex trading – like the news, economics, political policies and technical data from the charts. It’s too much, and it will lead to a mental meltdown. Stick with the basics like price action analysis – you will be amazed at what you can achieve by reducing your workload.

 

OCD Tendency #3 – Micro Managing Trades

chained to forex terminalAnother symptom of OCD in traders is when they try to ‘micro manage’ all their trading positions. Micromanagement in Forex trading may spur from the notion of perfectionism (an attribute OCD victims are well known for).

In Forex trading, this can lead to a lot of devastation; as you might enter a position for good reasons but then might end up pulling out for the wrong reasons – simply because you’re looking too much into smaller price movements.

Maybe you get too involved in the lower time frames that you forget the big picture and the massive moves that only take place in the higher time frames.

Forex trading is your own business, and micromanagement in the business place is counterproductive – it moves the needle backwards, not forwards!

One way that you could tackle this problem is by consciously making a point to stay away from the market after setting a trade – let it be and run its natural course.

Whether it hits your target or gets stopped out – the outcome isn’t as important, what matters is the process!

Let the market take control of the trade and don’t intervene.

Looking over the market’s shoulder, staring at the charts like a stalker won’t help drive your trade into profits. There is no need of having excessive control over a process that isn’t really in your control to begin with.

trading life balance

It seems difficult, but it can actually be easily done if you manage to keep yourself busy. Don’t let go of your day job, pursue many hobbies that will completely take your mind off the charts and keep you entertained.

You need these distractions.

As a trader, you might be insecure about a number of things which are the cause of your ‘micro manager mind-set’.

Maybe your Forex trading system is weak and not fully tested, therefore you don’t have full confidence in it – or perhaps you are at that point where you are seriously questioning your trading ability after suffering a major string of losses in the Forex market.

A temporary lapse of confidence happens even to the best of us. The same can be said for draw downs (i.e. a losing streak in Forex which cuts your account size significantly).

Luckily there are ways to deal with a losing streak and to bring your Forex mojo back up again. Learn How to Deal with A Forex Losing Streak

But whatever it is – You must do whatever you need to do to put yourself back into your “trading zone”. If you don’t address the underlying issues – you will always be the nervous micro manager.

Jesse Livermore, arguably the greatest trader who ever lived said:

 

“It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight…!” or then at another instance he said “ Nobody can catch all the fluctuations…”

 

The moral of these nuggets of wisdom is that over thinking or over trading will not make you money, it is patience and holding on to your trades that will.

Summary

Micromanagement of a Forex account is dangerous and exposes your emotions too much to the market, which leads to silly impulsive, irrational reactions. It stems from the inability to disconnect from the market. You must first believe in your trading system and trust it to perform before you start investing real money into it. Make sure you have hobbies or something else to engage your mind while you let the market tick away in the background, and do it’s thing without any emotional intervention from you.

 

OCD Tendency #4 – Can’t detach from Forex

forex trader burn outYou know what? If pursuing hobbies or holding onto a day job doesn’t work for you, then your inability to detach from the Forex market might be a serious issue.

Forex trading can be very addictive and can become very unhealthy, not just in terms of your performance but also in regard to your physical and mental health – there is no reason to deny this.

The point here is this. How bad is your trading addiction really? What is in your power that you can control and change? Do you need any sort of assistance?

Are you the sort of trader who is getting into trouble at work for checking your phone too much?

Are you not paying attention at a business meeting because you are thinking and obsessing over your trade positions?

Or have you reached that point where you have started taking days off work in order see the next interest rates announcement or the next jobs number, or have you just generally become obsessed with watching every single tick movement?

Seriously, delete your broker’s app from your smart phone if the temptation is too much!

Apart from obsessing and being addicted to Forex trading, there is another type of person, who I think is the antithesis of a gambler (i.e. a really hard worker who believes that success comes with doing your due diligence and breaking a sweat) and thus can find it hard stepping away from the markets.

This type of trader is in a way morally compelled to watch the market all the time, thinking or rather hoping that the more ‘work time’ they put into the charts, the more they will be rewarded for their efforts.

This notion cannot be farther from the truth – especially when it comes to trading where you can earn a lot ‘more’ by doing a lot ‘less’.

Summary

It is very easy to become addicted to the Forex market and let it consume your thoughts. All you think about all day is Forex and are driven to be in front of the charts all the time. This can cause problems at your job, and even turn you into an anti-social person.

 

Take Home Message

The bottom line is that overcoming ‘trading obsession’ can be very challenging for a Forex trader.

Forex trading success comes with developing a system that you have confidence in – you will get nowhere with second guessing every move in the market.

Stick to one system that works, like a good price action trading strategy.

Don’t let Forex trading have a negative impact on your life, hold onto a day job or pursue other hobbies or ventures freely.

With a price action trading system like the price action protocol, you can build confidence in your analysis by making your trading decisions directly from the price movements themselves, and eliminating the need to micromanage using a set-and-forget money management model.

Check out this set-and-forget style trade setup I took on the 4 hour time frame of the EURNZD this morning…

4 hour set and forget price action trade

Due to the strong trends we’ve been experiencing in the last quarter of this year, we’ve been watching the 4 hour time frame a little more closely.

I spotted this simple inside day cluster breakout trade setup and actually featured in our ‘chart of the day’ commentary inside the War Room.

The sell stop order was triggered, and using out split money management model – this is now a break even status trade. I have no more risk exposure here – so, I can easily ‘forget’ this trade and let the market do the rest of the work for me.

This is the beauty of set,forget and collect trading combined with highly effective money management strategies.

Inside our Price Action War Room, we are positive thinkers with a big appetite for profiting from the markets.

If you are serious about your Forex trading and want to take it to the next level, or if you are struggling with some of the symptoms of Forex obsession and need a trading community to bounce ideas off and help you get back on track then please feel free to check out our War Room Lifetime Membership.

I hope this article was informative and even an ‘eye-opener’. I would love to hear back from you guys – tell me if you feel like you’ve overly obsessed with Forex trading before. Let me know in the comment section below.

Cheers to your Forex trading success!

7 Comments

  1. Kenny September 30, 2014
  2. ravi September 30, 2014
  3. Dale Woods October 1, 2014
  4. ChiPham October 3, 2014
  5. nivti October 5, 2014
  6. Michael October 7, 2014
  7. Sebastian March 31, 2016

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