You are probably trying your best, giving your best shot, meticulously analyzing charts, staying updated with market news, and dedicating long hours to comprehend the market for profitable trades. You spot what appears to be the perfect trade, and you trigger the entry with high leverage, anticipating substantial profits, right? Suddenly, the market begins to move against your position, triggering an emotional roller coaster ride.
Initially, frustration sets in as you've spent hours studying the market and were convinced of your trade's success. You find yourself glued to your seat, trying to analyze every pip across various timeframes, growing increasingly frustrated and doubting your abilities. Panic creeps in as you're torn between closing the position at a loss or holding on, hoping for a turnaround. With no defined stop loss, losses accumulate, and you eventually capitulate, closing the position out of exhaustion.
Seeing the red numbers on your screen ignites a determination to retaliate against the market. You vow to show it who's the boss and impulsively open another position with even higher leverage, only to find yourself on the losing end once again, driven by emotions rather than sound decision-making.
It's highly likely you've experienced or are currently undergoing this cycle, contemplating whether it's time to throw in the towel, feeling physically and mentally drained with minimal or no profit to show for your efforts.
To break free from this cycle, firstly, stop trying to control the market. A perfect setup doesn't guarantee market compliance. Instead, focus on regulating your emotions and behavior.
Secondly, establish your risk tolerance. Define your stop loss beforehand, allowing you to accept losses without emotional attachment or regret. You have to see the stop loss value in front of you to decide if you are okay to take the loss or you prefer a lower value. In case the market hits your stop loss you already know, nothing new here okay I lost 50$ I can move on to the next trade without regretting or being emotionally attached to this trade.
Don't let previous trade outcomes dictate your future decisions. Each trade is independent, and profitability is determined over a series of trades.
Here are some initial tips to adjust your approach and set beginner traders on the right path:
- Develop a solid trading plan and adhere to it with discipline.
- Establish a consistent routine and maintain self-discipline.
- Concentrate on aspects within your control: entry, stop loss, take profit levels, and risk management.
- Only risk what you're comfortable losing to avoid emotional decision-making.
- Maintain a daily or weekly trading journal.
Subsequent articles will delve deeper into these topics, guiding you on your journey to becoming a proficient trader.