5 Forex Trading Situations You Must Be Prepared For

Forex trading is a "place" full of opportunities but also pitfalls. If you arrive unprepared for your appointment with the market, if you haven't completed a sufficiently broad and deep training course, there is a risk of losing capital in a very short time. Even after studying and fulfilling your duty as an aspiring trader, it is not uncommon to find yourself disoriented when faced with certain eventualities. What are they? How should they be managed? Here are the 5 situations that traders, whether beginners or experts, must be prepared to face.

Trade failure

The life of traders is not all roses, far from it. Along their path, they encounter obstacles, satisfactions, but also disappointments on a daily basis. It's important that they learn to lose, since "defeat" is part of the game at least as much as, if not more than, victory. Yet many traders, not necessarily beginners, see a losing trade as a disastrous event, capable of profoundly undermining their mood. Since the psychological aspect plays a predominant role, it is necessary to develop a culture of defeat as soon as possible. If you suffer a hard blow from a morale point of view, it's a good idea to stop and ask yourself some questions. Did I follow my strategy? Did I make mistakes or was the loss inevitable? Only in this way can you transform a negative (but physiological) event into a tool for growth and improvement. To improve, it is necessary to learn from your mistakes, and to learn from your mistakes you need to.... Lose, at least every now and then.

Big wins

If losing is dangerous, due to all the psychological implications, winning is no less so. And for the same reason. In the end, it's all a matter of psychology. If you bring home a trade and generate a significant profit, the risk is that a deleterious mechanism is triggered in the trader's mind. Some call it overconfidence. It reads "recklessness". It is not uncommon for a good win to be followed by a disastrous loss. This is because euphoria leads to making inappropriate, potentially dangerous choices.

The opinion of others

Even the opinion of others, of the members of our trading community, can have terrible consequences. This usually happens when the opinions of others refute our theses, when they invalidate the foundations on which our strategy is based. And then doubts arise, contradictory thoughts, a certain distrust or, even worse, paralysis. Who is right? They could be, of course, but so could we. In this case, it is necessary to take it with philosophy and a pinch of relativism. No one has the truth in their hands. We don't have it, just because we were the ones who developed a given hypothesis. They don't have it, just because we have lost faith in ourselves. So, what to do? One piece of advice is to try both paths, perhaps using demo accounts.

Paralysis

As we have already said, emotions play a fundamental role, however undesirable, in Forex trading. Emotions, of any nature and intensity, compromise the ability to think clearly and loosen the constraints determined by discipline. In some cases, they can paralyze. Paralysis, obviously intended as a mental and emotional block, occurs in two cases. One, the market is in a panic, all our references seem to melt like snow in the sun. We don't know what to do so... We don't do. Waiting for the best time to trade is fine, but waiting too long means losing opportunities. Two, we have lost too much, so we are afraid. Like a child who, being afraid of the dark, hides under the covers and doesn't want to come out, a trader entrenches himself behind an illusory and deleterious immobility. All that remains is to take a deep breath, lucidly analyze risks and advantages, perhaps asking for the opinion of other traders.

Guilt mixed with fear

This feeling may seem strange but it is a constant for many traders. When you win one, two, three, dozens of trades, maybe consecutively, fear of success creeps in. This is often "enriched" by a sense of guilt. In fact, making money (a lot of money) with trading is in contradiction with the work culture, the one according to which you only earn if you work hard, with your body and your brain. And yet, at a certain point in one's career, money seems to rain from the sky. These are false and misleading thoughts. First of all, it is necessary to think that in trading, as in life, there is no free lunch, and therefore a favorable period can be followed by a strongly unfavorable one. Furthermore, it is good to realize that trading is tiring. Of course, it is a different type of fatigue than that experienced when wielding a spade or studying, but it is still fatigue: first and foremost intellectual and emotional. Therefore, banish unnecessary guilt.