Forex Trading: Mastering the Mental Game

Forex Trading is not just a matter of technique and intellect. To make a career, it is not enough to develop a wealth of advanced knowledge. The right mindset is also necessary. In fact, in Forex Trading, as in speculative investing in general, the psychological sphere plays a fundamental role, despite what the collective imagination may say (which thinks of the trader as a ruthless calculator). Therefore, in addition to honing their skills and cultivating their intellectual abilities, a budding trader, who is approaching this demanding commitment, should also prepare mentally. They should begin and - if possible - complete a path of autogenic training that will allow them, then, to govern or at least manage the psychological sphere. This, in fact, is put to the test when doing Forex Trading. It is at all levels and for everyone: the problems are the same whether you are a beginner or an established professional trader. Here is some advice to mentally prepare for Forex Trading.

Understanding the True Nature of Trading

Everyone who approaches this activity obviously knows what trading is. It's speculative investing, buying low and selling high, market analysis, programming and managing operations, calculating risk. Sure, it's this but also much more. In fact, it can be said that the true nature of trading, the one that really affects the chances of winning, stimulates other strings, concerns a completely different sphere. So what is trading? Apart from the technical issues, which represent its visible substance, trading can be defined as hard work, both from an intellectual and emotional point of view. Those who approach trading must know that no meal is free, especially when it comes to markets (especially currency markets). They must know that hours and hours of fatigue and stress await them. Therefore, it is good to abandon once and for all the beliefs that populate the collective imagination, and which, after all, only serve to attract, perhaps as part of a well-crafted advertising campaign. Only in this way will you be able to cope with the inevitable problems that, especially at the beginning, all traders must face, and achieve your goal over time: becoming rich or at least conquering the much-coveted financial freedom.

Developing the Concept of Defeat

This is perhaps the most important step. For many, conceiving defeat is an unattainable or at least prohibitive goal. It is for two reasons: first, because defeat affects self-esteem and, especially when it assumes significant dimensions, it is capable of questioning the way in which one thinks about oneself, one's own self. Secondly, because there are few who, especially if young, have tasted true defeat, so they are not used to it. Yet, if you intend to start trading you should incorporate the concept of defeat into your cognitive system. Let's be clear, it's not about diving in headfirst, bandaging your head before breaking it. It's about being mentally prepared for an event that simply cannot be avoided. The truth, however uncomfortable, is just this: everyone loses, and at all levels, from beginners to trading champions (obviously the "how much" you lose is decisive). In fact, beginners are subject to a very high risk of defeat. However, a lot can be learned from defeat. It can be a real engine of change and growth. In order for it to take on these contours, however, it is necessary, when it arrives, to know how to process it. The first step is certainly to accept it as something inevitable, as part of the game.

Being Well-Disposed to Study

A belief is particularly widespread among beginners. That is, the belief that study is a fundamental element, yes, but that it only concerns a part of a trader's life, namely the one that precedes the debut on the market. In this perspective, the dynamics are similar to those that precede entering the world of work: you study, acquire skills, start working. Leaving aside the fact that ongoing training is now a leitmotif of many professional careers, it is simply unthinkable for a trader to stop learning… Even after entering the market, even when the peak of professionalism has been conquered. In fact, however valid the dogma (typical of technical analysis) according to which history repeats itself, the market always adds something new, and the same goes for the economic environment. Therefore, the market evolves, the context evolves, the dynamics evolve. The only way the trader has to manage this evolution is.... Study. In any case, continuous training is fundamental, if only because, however in-depth the study path has been, something will always be left out. Therefore, if you want to become good traders, prepare to study... Forever.

Preparing for Stress

Here, this is a very important but at the same time neglected aspect. It can be defined as the uninvited guest of every trading activity: stress. There is nothing to be surprised about: after all, the stakes are high. Moreover, it is all on the shoulders of the trader, who is to all intents and purposes an individual alone, who is daily confronted with his responsibilities. He has the power to guarantee himself wealth and a happy future, as well as to reduce himself to poverty with his own hands. With great power comes great responsibility, and with great responsibility - it is good to add - comes a lot of stress. Stress, however inevitable, is very harmful for a trader. It reduces lucidity, making the investment activity less effective or even counterproductive. So, how to eliminate it? The bad news is that it cannot be eliminated, not completely at least. It wouldn't even be desirable, since stress is a physiological response to dangerous situations. However, it must be reduced to a minimum, to a quantity that is, if not beneficial, at least not invalidating. How to do it? There are two solutions, to be adopted simultaneously: undertaking a path of introspection (difficult) or adopting practical measures (easier). The reference is to the practice of money and risk management, but also to respecting the trading plan. This, in fact, reduces the margin of action during operations, and effectively prevents stress from influencing the final outcome.

Learning Self-Control

Self-control is a universally recognized useful skill. This applies to everyday life, to emotional life, to professional life, etc. Obviously, it also applies to trading. Indeed, especially to trading. The reason for the role that self-control plays in trading is intuitive: trading, especially at the moment of operation, triggers a real emotional storm, which is harmful and therefore must be managed. How? By practicing self-control obviously, the only inner resource that allows you to resist emotions or at least defuse their effects. Now, learning self-control is not at all simple. It must be said, however, that some people are endowed with a natural coolness. It is they, the "cool-blooded" people, who represent the most advantaged type. Certainly, self-control can be exercised, trained, improved. It's a private matter, however: every individual is dominated by specific dynamics. Therefore, since everyone in their life has found themselves in situations that have forced them to exercise self-control, the advice is to recover those habits and cultivate, according to one's own methods and times, this important quality.

Learning Discipline

It is unthinkable to trade, and in particular Forex Trading, without being disciplined. Discipline is an important quality, indeed fundamental if you intend to "survive" the market. Okay, but discipline towards what? Obviously, towards oneself. As already mentioned, the trader is an individual alone, who can only count on himself and his own abilities. Specifically, it is about being faithful to one's own trading plan, to one's own analyses, to one's own way of doing money and risk management. In short, no deviations are allowed unless the situation requires it. Adhering in a disciplined way to one's own trading plan allows avoiding emotions taking over, but also conferring to one's activity a rational component, if not even a scientific one. The trading plan itself, in fact, if created with all the trimmings, puts statistical elements at the center, and a practice of statistical investing that has nothing to do with improvisation. Now, just like self-control, there are people who are naturally more disciplined than others. However, discipline can also be exercised. The only truly necessary ingredient is willpower.

Scheduling the Day

This is an important yet very neglected aspect. To prepare mentally, therefore to arrive mentally equipped for the appointment with the market, it is necessary to consider not only duty... But also pleasure. In a nutshell, it is necessary to reserve spaces for oneself for sociality, for free time, therefore a part of the day to dedicate to oneself and to others. It is in fact harmful to trade until reaching burnout, which among other things - given the amount of stress that one is called to endure - would arrive very soon. Therefore, avoid "filling" your day with trading. Now, some practice intraday trading, so their presence is required more than in other contexts and situations. What to do in these cases? There are two alternatives: either give up exploiting all, but literally all, the possibilities, or practice automatic trading. Demonized in the past, automatic trading today represents a very safe practice, if done with the right precautions and with the right tools.

Being Willing to Take a Break

This is also a little-explored concept, due - again - to the portrait of the "perfect" trading that the collective imagination tends to spread. According to a mistaken conception, trading is cunning, calculating, a fanatic of carpe diem, a tireless money machine. The reality is quite different. The trader, even the professional one, is not a machine and is not even tireless. On the contrary, as already mentioned, he is at risk of burnout, as is the case in all activities that involve mental resources. Therefore, this risk must be taken into consideration and reduced to a minimum. One idea could be precisely not to occupy the whole day. Another idea, perhaps more effective, is to take real breaks as needed, lasting even a few days (or longer, if you feel this need). Unplugging, suspending the activity, should not be seen as a retreat, however strategic it may seem. Sometimes, it is simply a physiological need, and indeed a tool to recharge one's energy and optimize trading activity, once it has been resumed.