Harry Dinkelberg has just lost his beer money on a short trade on the pound. He blames the market, flexes his fingers, and then aggressively shorts all the pound pairs with huge position sizes in the forex market.
Then he loses his son’s college education fund on the same day, so he decides to quit and call it a day before lunch.
Harry Dinkelberg lacks the strength, or ability, to function well in the face of psychological pressure.
Instead of moving forward after losing a forex trade, he took on risky trades in an attempt to recoup his losses. Because he was trading based on his emotions, his trades went down the drain.
As in life, Forex trading requires you to maintain your balance even when you are under tremendous physical and emotional pressure.
Take Chris Gardner from Pursuit of Happiness For example, he lost his wife and his home after leaving his medical career, but he remained resilient and focused on the tasks ahead of him.
Eventually his persistence led to him becoming an employee of Dean Witter Reynolds, a brokerage firm, and even CEO of his own firm, Garder Rich & Co.
When you lack trading power, you treat every loss in the Forex market as a personal failure, when the truth is that these individual results matter little in the grander scheme of things.
When a trade is going well, you feel happy and everything is fine. But when you face a loss, you feel frustrated and disappointed not only in the trade but in your life as well.
Because of this, your ability to make sound trading decisions is compromised and you end up either making revenge trades or not making any trades at all.
A great way to react to losses is to analyze the results, review your trading setups and figure out what went wrong.
A trader who lacks strength and flexibility will feel very frustrated if he decides to take this constructive approach.
What if he suffers a series of consecutive losses or a significant drop in value?
If he can’t weather these losses with resilience, he could end up falling into a recession like Mr. Dinkelberg over there, which could hurt his business even more.
To be a consistently profitable trader in the Forex market, you need to: Build your strength. To do this, you need to: Time and experience.
Time and experience will allow you to easily adapt to losses that may sometimes seem beyond your ability to bear. The more familiar you become with a negative situation, the easier it will be to deal with it, and the stronger you will become.
A trader who has suffered repeated losses will have something to fall back on when faced with a big drawdown.
He knows that any dips he encounters are just small setbacks, and that eventually he will be able to get back on his feet and reach new highs in his account balance.
Remember that every setback is an opportunity to build strength.
As a beginner trader, it can be very difficult to stay active during times of emotional stress – but that doesn’t mean you have no other recourse.
A good habit to develop before entering any trade is to first imagine the worst possible outcome. Imagine how an active person would feel and act if they were stopped from trading.
Because you’ve rehearsed your reaction in your head, it will be easier to respond if you actually lose. In a way, you’ve gained strength without actually losing yet!
An active Forex trader is one who can stay consistent even after a loss. That’s what you want to be. By staying active, you avoid taking losses on a personal level and thus emerge a better and stronger trader.
