The most dangerous time to trade

whytrading - The most dangerous time to trade

There are periods when the best trading decision you can make is to skipping trading entirely. A good example of moments like this is after you just made a substantial profit trading forex. Despite the needs to do so, a lot of traders continue to trade in these circumstances. Winning big in forex trading commonly elicits emotional feelings of fantasies.  It makes traders begin to see things that are not there and feeling powerful. These feelings make them begin to trade more in an effort to make another big win with a justifiable rationale to do so. Trading this way commonly results in losses which in the end cancel the big gain the trader made.

The most dangerous time to trade

What commonly makes traders lose after winning big?

A successful trade commonly boosts the confidence of the trader sometimes to his or her detriment. What typically happens is that the trader starts to dash in and out of the market in an effort to make another win without considering whether or not it is rational to do so. It is a trading mistake that majorities of traders around the globe make. After winning big, the trader starts to have a euphoric feeling. The feelings are commonly caused by the release of chemicals in the brain which commonly regulates these feelings. For example, the dopamine receptors in the brain activate the release of dopamine when the trader makes a big win. The feeling is part of human nature. There is nothing bad about it. However, you must be able to control it. The problem is not in the experience but in the trader’s ability to manage the feelings properly and channel it right to his or her benefits.

Novice traders frequently fall prey to this euphoric feeling. Winning big makes them start to develop a faulty sense of security. They begin to think that they can always win. This makes them engage in the dangerous trading practice which is over trading.

How to mitigate the problem of overtrading which result from big wins

The original step is to realize that your purpose of trading forex is to make a profit. This will remind you that your trading won’t just be any type of trades but one that is absolutely grounded on facts and figures. You need to have this at the back of your mind and follow these steps to remain safe always while avoiding overtrading and irrational trading.

Devise a clear entry and exit strategies

You should have a trading strategy with a properly define entry and exit levels. It must specify why you are entering the market, and why you want to place an order. If you have no answer to these questions, it is better to avoid the trade.

Stay away from Trading Short term

Short-term trading strategies like scalping make a trader liable to rash trade decisions. Scalping trading strategy hardly ever come with sufficient technical or fundamental rationale for making a trade order. Often, scalpers enter and exit the market without carrying out proper trading analysis. It is better to trade longer timeframes, like the 4-hour or the daily time frame.

They provide the trader with better profit potential. However, it takes a while for good trade setups to form on these timeframes. Thus, for individuals who trade merely with entry and exit filters, it acts as an automated control tactic. The chart below illustrates a symmetrical rectangle that forms on the AUDUSD pair. It is both a very profitable trade setup which took six days to break and is not noticeable on lower time frames.

The most dangerous time to trade

Take some time out

When you win big, it is in your best interest to log off your computer and give yourself some break. Get something else and do to keep busy till the euphoria wears off. This will avoid trading impulsively and rashly and keep your profit secure instead of making a trade that would wipe off the entire profits you’ve made.

If you have mistakenly entered a trade after making a big win, stop at once to avoid getting trapped.

Conclusion

The time that is most dangerous to trade is after you have made a big win. You must avoid getting ripped off by the market in an effort to boost your profit and make more gain you have recently made a big win.

Find alternative things to do and occupy your mind till the period is over. With a bit of practice, you will be able to manage these emotions properly and give their rightful place.

 

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