Living Without a Steady Paycheck
“We are entrepreneurs! We are taking risks by not settling with comfort and security of a 9-5 job.”
But for us Forex traders? Not quite. That above statement doesn’t quite fulfill the requirements of “fully taking risks.”
If you lost a couple hundred bucks in trading and you got upset and distraught about it afterward, stop whining and complaining and being upset.
You didn’t accept the risks and you shouldn’t have traded if not. You just “knew” about risks but you didn’t “understand” the risks.
So how do you do that?
That’s what I am talking about today, How to Hold Your Ground as a Investor-Monk…. Embracing and Fully Accepting Risks in Forex Trading…
1. Create state of mind not affected by markets behaviours (like price movements, sudden spikes & falls)
Accept that the Forex market isn’t going to do a favour for you just because you are cool and pretty. The market is for everybody, is just an auction place where thousands can trade at a time. If your mental state gets affected by the market movements, either excitement or disappointment, you are already letting the market dictate how you feel. Off the bat, your naive brain would be more susceptible to making easy mistakes because your mind is stirred by your emotions.
See a great example of driving a car. If you are angry or upset, you are more likely to cause accidents. Calm state of mind is essential to driving, navigating your brains properly, and to Forex trading of course.
2. Fear is source of 95% of errors you make
Fear will cause us to perceive things biased – ask yourself when you are looking at the market, “would it have been the same if I won or lost 3 times in a row before?”
Our minds are biased to recognize what’s happening right now with what happened to us before. If we had a bad experience with a scary barking dog when we were young, we tend to associate that experience when we see dogs when we grow up.
Our brain subconsciously links our past experience in our memory and what’s happening right now – so if coming off two or three losing trades, next signal market gives you will feel overly risky – your mind is automatically and subconsciously linking the now moment with your most recent trading experiences – taps you into pain of losing and fearful state.
3. Accepting risks means accepting consequences of your trades without emotional discomfort or fear
So we all know that we lose sometimes right? But most of us like to think we can win more than we lose. This leads to… arrogance. Most of us believe we already know what’s going to happen next, based on what we perceives is happening in the market – this creates a bit of biased perception of the market, even if the market itself has absolute uncertainty at any given moment.
It’s extremely difficult to act in a way that contradicts our belief systems. If we put some kind of expectations on what’s going to happen next to the market, and if the market didn’t act as expected, we would feel upset. This is the reason why many traders feel upset when they lose trades. They start from the assumption that they can predict the market and therefore they know what’s going to happen. When the outcome was not as expected, they have hard time accepting the consequence. This becomes an obstacle for them to fully accept risks, said differently, any consequences.
So to fully accept any consequences, we first need to change our beliefs that “anything can happen” in the market. With this approach, we will never feel betrayed by the market no matter what happens, hence we can fully accept any consequences in the market.
4. Any degree of fear will take you out of moment and flow, and therefore diminish your results
When we are upset or affected by fears, our brains would become more rigid and nervous, and our body would feel more tense and choppy. When this happens during trading, we tend to make more mistakes such as incorrectly typing wrong trading volumes or taking a wrong direction of trade.
This whole fear thing will freeze your mind and body, and nothing seems to help.
But again, the whole premise is wrong here. Why would you feel scared first of all? Why would you feel fearful about getting in trades?
Because you don’t want to lose your money?
Because you don’t want to be wrong?
Because you are so uncertain about your trade?
Let’s go back to the #3: accepting risks means accepting ANY consequences of your trades.
To do that, we need to accept the fact that “anything can happen to the market.” When we do that, we embrace an absolute UNCERTAINTY of the market. When we know anything can happen to the market and nothing to be scared about, we no longer have fear of losing or making a wrong decision, because an absolute certainty includes you losing trades.
So, when we are looking at shivering fingers or fast breathing due to our fear, we are only looking at symptoms not the root cause of the problem. These physical reactions are just symptoms of the root case, which is our fear. To fix our fears, we need to first change our belief systems to embrace an absolute uncertainty in the market.
Underlying paradigm: You won’t perceive anything that market can do as scary or threatening once you embrace anything could happen to the market, if so, there’s nothing to fear, and if you are not afraid then you don’t need courage to begin with!
In Conclusion: Learn to stop avoiding and start embracing responsibility and risk
-Take out psychological variable from equation of decision making in trading
-The most effective and functional trading belief is “anything can happen”
The above are some of the techniques smart investors are using to embrace risks involved in trading. Needless to say, all the other must-haves of consistently profitable Forex trading still apply; testing your system thoroughly to validate its efficacy, optimizing your system to adapt to the market and regarding investment trading as a probabilistic activity.
Guest post by Sashi Asakura of IntrovertedForexEngineer.com