Why Controlling Your Actions, Not Emotions, Makes You a Better Trader

While choosing a particular system or strategy is essential in trading, this alone doesn’t guarantee a successful outcome. In fact, success in Forex greatly depends on the traders’ frame of mind at a given point in time.

As of now, Forex market analysis and viewpoints are available in overabundance. There are plenty of websites that provide their opinion and estimation on the upcoming changes on the market and, what is more, they present convincing evidence of why following their trading strategy is the right step forward.

Being aware of the latest news doesn’t necessarily make you an affluent trader. In fact, collecting and analyzing the current market information is only part of the process of making profitable decisions.

What usually happens after all the information has been absorbed, is that a trader is keen to try it out in practice. This step is usually accompanied by a mixed feeling of excitement and uncertainty. In the best outcome, a trader will have successfully completed a few trades and gained a fair bit of confidence. More trades will follow and, probably, a more aggressive attitude will be applied… with a sudden realisation of why around 90% of traders drop.

To be a successful trader means to possess a high level of discipline and to learn how to manage emotions… at least so we believed until this point. For years it has been a staple principle to blame the trader’s failure on their emotions that would get out of control and hinder their decisions.

Until finally neuroscience made an impressive discovery by placing people with risk-taking tendencies (i.e. traders, poker players) into brain scanners. The discovery revealed that our decisions depend on the current emotions. The way we feel has a direct impact on what we think, as well as the decisions we make.

The California Institute of Technology took it one step further to determine whether traders resort to their rational thinking or intuition. To accomplish this, pictures of the subjects’ brains were taken while they were in the process of evaluating trades. The results revealed that in most cases traders relied on their gut feeling regardless of the time they had spent researching and analyzing the market.

To put an extra spin on the plot, the research indicates that only very few (no more than two) “disciplined’ decisions can be made at a time. This means that spending hours looking at charts and watching every small change will not benefit your trading efforts.

Instead, try these tips:

  1. Move your eyes around and change your sitting position regularly to stimulate your senses.
  2. Get into the habit of moving away from market charts and quotes.
  3. Perform breathing techniques to oxygenate your brain and manage stress levels.

Short physical activities while having a break during a day of trading – anything from a short walk to a workout in the gym – will help boost your state of mind, which in its turn will support making profitable decisions on the exit point.

To summarise all of the above, the decision making process is strongly connected with our body, feelings and emotional state, and therefore the idea of controlling emotions only is amiss. Developing full awareness and control over actions is the valid approach. Any individual can (and does) feel something at various points of time, but an existing emotion doesn’t always require a physical response.

Everything we feel and experience on the emotional level should be viewed as data, which can and should be analysed. Don’t ignore this factor and use it for your advantage to excel your trading skills.

When you suffer a setback, best thing is to stick to a routine that can prevent making matters worse. The more you practice the habit, the greater the chances of it becoming your second nature. The challenging part is to develop a set plan to help you be aware of your actions.

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from Forex Crunch http://feedproxy.google.com/~r/ForexCrunch/~3/LmUkWdLT3Zs/

from Online Forex Trading Resource
View thesource article here

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