5 Tips for Avoiding Forex Euphoria



In forex trading, also winning can be dangerous. Some traders get euphoric, make bad trades and eventually kill their forex account. This can happen to anyone. Here are 5 tips for overcoming it.

So you’ve learned forex at a course or by yourself and trained yourself with technical analysis using a forex demo account. Now you’re absolutely ready for a real account. So, you open an account and things begin well:

The Euphoric Scenario

You’ve followed your strategy, placed a trade and closed the position with a nice win that was lower than your Take Profit point. You then planned another trade, placed it and saw the trade close at your Take Profit point. Perfect!

Now you feel more confident and double the size of your trade. You win again and you regret not placing the large trade size beforehand. Another win, and you feel that you’ve learned the system. Yet another win and you feel invincible. Who needs a strategy when you’re winning?

With all this confidence, you find yourself in a bigger position. The trade now goes against you and you move your stop loss away. The trade loses, and then you see it shoot the other way. You’re still certain that you know how to beat the markets. This slap doesn’t get you to reduce the size of your position, but just put a deeper stop loss. Another loss makes you want revenge. Dealing with losses is something you’re not familiar with.

You know the end – the account is wiped out.

I’m sure that some of you have experienced a similar scenario.

  1. Analyze a winning trade: Many traders analyze their losing trades and take the lesson for the next trade. This is great! Do it also for winning trades. There’s a lot to learn from those ones as well.
  2. Take a break: Don’t rush into a new position immediately. This will probably be a hasty and losing position.
  3. Don’t drool on your larger account: It sure is fun seeing more money in your account, but it doesn’t help you being a better trader. This is a waste of time and you can become over-confident.
  4. Don’t enlarge your position sizes: Yes, you could have made more money with a larger position on a winning trade. This goes both ways – you can lose more money in your next trade. Change the positions only periodically.
  5. Withdraw winning money: Occasionally withdraw money from your forex account to your regular bank account. Seeing less money will weaken the euphoria sensation and also minimize the sum that you can lose…

I’m sure that you have tips of your own. I’ll be glad to hear them.

Further reading:5 points on when to go pro.


About

Yohay Elam – Founder, Writer and Editor

I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me.

Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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