Is Forex Trading Stressful?

Is Currency Trading Stressful?

Many people are excited by the idea of trading in a 24-hour market, going head-to-head with the “big boys” and controlling large amounts of currencies. Other people are terrified by this prospect. They want to try currency trading, but the image they have of a Type-A, caffeine-charged, numbers crunching, stressed-out trader is not consistent with their personality or the type of lifestyle they desire. Does a Forex trader’s life really need to be filled with stress?

How Stress Develops

Let’s look at where stress originates. I could discuss several psychological topics on stress, but that would not be useful to a trader who simply wants to trade Forex without substantially increasing the amount of stress in his life. So, where does stress come from?

The short answer is uncertainty. A trader’s life is filled with uncertainty: Will I make or lose money on this trade? Will I get a margin call? What will happen to the USD today? How will the payrolls report affect the market? The questions (and the uncertainty) are endless. Traders choose a unique way of life with challenges that many other professionals simply don’t encounter on a daily basis. Uncertainty is injected into each trading day -- and each trade.

How to Control Stress

Before you start to think that stress is simply a part of every trade that cannot be controlled and definitely never eliminated, think again. There are aspects of a trade that we simply cannot control, like how the employment report will affect the market or whether interest rates will increase or decrease. (Many traders consider this uncertainty to be exciting.) However, we can participate in the market’s excitement while controlling the uncertainty and minimizing the losses. Below are a few ways to control trader stress.

Use A Trading System

Trader stress can be reduced by using a good trading system. There is no need for a lifelong quest for the holy grail of stress reduction or searching for the secret of the stress-free trade like a modern day Ponce de Leon! The wisdom of the stress-free trade can be found in a good trading system.

Use Risk Management Techniques.

Always use your stop loss orders . They will allow you to sleep soundly.
Always use limit orders to lock in profits. Remember you never lose money when you take a profit. You lose money when you lock in losses or let profits run down to losses.
Don’t let fear or greed control you.
Use margin in moderation. Remember, it can be a useful tool to multiply your profits, but it can also make losses grow exponentially.

Less Common Ways to Reduce Trader Stress

These techniques may seem irrelevant or that they are not directly related to trading, but experienced traders know that they are useful and help to keep you trading through the worst of times.

Know the big picture.

No trade exists in isolation. The Intermarket approach notes that every trade is part of a larger picture. Each trade must fit into that picture like a piece of a puzzle. This means every trade must have a reason or purpose of which the trader is acutely aware. This transcends trading for money. It refers to the adoption of the trading lifestyle that is consistent with your personal goals and values.

Practice Detachment.

Once a trade is placed, let it go. Every trader knows the temptation to constantly watch how a trade is performing. The detailed, real-time information available on the Internet makes it possible to watch a trade as it moves up or down. Resist the urge. If you have a good trading system with your stop orders in place, there is nothing more for you to do on this trade. Constantly watching it with your finger over the sell button can be very stressful.

Have a Panic Button.

Every trader has his or her moments of panic. When a trade is going the wrong way, traders often wonder whether they should close the trade (even when their trading system says to hold). The market can be quite volatile and any set of triggers can cause a trader to panic. When panic sets in, the trader can simply press the Panic Button. A Panic Button is any action helps to alleviate tension or break the rising anxiety cycle by diverting the trader’s attention from the immediate trading stressor. Consider exercising, taking a walk, or counting to ten.

Remember Your Trading Wisdom.

The trading wisdom is the lesson learned from this trade. Using only positive language, write down anything you learned from this trade. This technique helps the trader to feel more control and reduce the level of uncertainty in present and future trades.

Trading Forex does not have to be stressful. Taking simple steps can help control the primary cause of trader stress: Uncertainty. And they can also help the trader to feel more happiness and less anxiety in trading Forex.