Overtrading doesn’t just apply to opening a position; it also applies to closing positions.
Once you have done your analysis, and decided that a trade meets your criteria, if you decide to go for it you have to be able to “see it through,” unless it becomes a losing trade.
That’s why it is important to have predetermined stops when you open a position.
Remember the market doesn’t always move in straight lines, which means a winning trade might initially show a loss of a few cents before it continues in your direction.
Professional traders know that their emotions are going to affect their trading whether they like it or not.
As a result, they develop personalities that allow them to overcome their emotions and trade profitably.
Two of the most important personality traits are trading patience and discipline, because they allow you to handle one of the most difficult aspects of trading.
Possibly the most emotional time for a trader is when their PnL is negative, and they are waiting for their next trade to come along.
During this time they will lose there trading patience and they will be desperate to take their next trade in order to make back the money that they have lost.
Most new traders (and also some experienced traders) will lose there trading patience start taking trades that are not part of their trading system (known as making up a trade).
As soon as this happens, their loss will increase, and will continue to do so until they realize what they are doing and correct their behavior.
Trading Patience and discipline are vital personality traits for professional traders.
Having trading patience allows you to wait for your next trade regardless of your current profit/loss, and being disciplined allows you to take only trades that are part of your trading system (not making up a trade).
For some traders, the thought of losing money is enough to make them instantly patient and disciplined, but for others, the emotions are too strong, and they need to cultivate their patience and discipline.
One method of learning how to build trading patience and discipline is to keep a detailed log of every trade that you take.
At the end of the day, replay every trade, and compare the replayed trades to your trading log.
If there are any differences, you should be able to determine what caused them, and hopefully know what you need to avoid the next time.Another method of building trading patience and discipline is to have absolute confidence in your trading system.
Knowing that your trading system will make money over the long-term can be enough to overcome the negative emotions that occur when you are experiencing a loss.
The only way to have confidence in your trading system is to test the system thoroughly.
If you have tested your trading system over a significant length of time, and it is consistently profitable, there is no reason to question that it will continue to be profitable
Trading patience and discipline facilitate the trader becoming acclimated with the markets, knowing risk tolerance and developing a successful daytrading strategy.
I strongly believe that every aspiring Forex trader can benefit from simple psychological exercises. These can positively affect one’s mindset, improve their level of enjoyment, and most importantly – their profit margin
First thing every Forex trader who is looking to strengthen and improve his mental state should do is to decide on what he’s hoping to get out of it – or set some goals. Some Forex traders will aim to become able to always follow their entry rules, while others want to be able to stay patient and wait for the next setup if they miss their entry. Others will want to limit their risk exposure, while others will try to manage their trades by their exit strategy, rather than by guessing. In any case, the Forex trader will want to limit the effect of his emotions – the irrational part of his brain – have on his decision making and logic.
Once your goal is set, the best way to move forward is to design a strict set of rules you will follow in all of your Forex trades – and stick with it. In practice, the best way to go about this is to design a trading system and practice it for as many times as possible – while taking note of every trade that takes place. If you are able to do this, you will soon start to notice that the fear of losing and anxiety will have less and less effect on you – until one day, they are only a distant memory.
“The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.”
- Jesse Livermore
“You make money on Wall Street by being very selective and being patient, waiting for those opportunities that are irresistible, where the percentages are very heavily in your favor.”
- Seth Glickenhaus
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