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Five Ways to Manage Stress in Forex Trading

Trading Forex can be a stimulating and lucrative career choice that allows independence and flexibility. Others choose to trade currencies with the hope of securing additional income while continuing their primary activities like a full-time job, freelance career, entrepreneurial activities, or raising children. Traders fall within a large spectrum of goals, intentions, lifestyles, and desires.

One feature that currency traders have in common is stress. Stress can affect traders in every financial market, but the Forex market is different and its unique characteristics bring about different stressors to traders. It is critical that Forex traders learn how to manage stress in order to control their emotions, limit their financial risk exposure, and promote healthy living.

Most experienced traders use the following stress management techniques at various times in their trading careers or even their trading day.

Five Stress Reducers for Traders

  1. Identify the Signs of Trader Stress – traders are people too, but there are specific ways that traders behave when they are experiencing stress. Any trader showing these signs of stress should exit the trade, take a trading vacation, or take stress management steps (technique #2). The signs of trader stress include the following: Constantly checking a trade, hyper-trading (or making too many trades), frequently changing a trade, making mistakes on the trading platform, and obsessively watching their charts.
  2. Use Stress Management Techniques – traders can use basic stress management techniques throughout the trading day. Meditation, visualisation, deep breathing, exercising, yoga or even taking a short walk are all proven stress reducers that can be useful in as little as 5 minutes.
  3. Use a Trading System – a trading system helps to take the emotion out of trading currencies. It provides the entry and exit points, and clear instructions on steps to take to secure profits or cut losses. These are a few of the decisions that traders need to make throughout the trading day. Without any guidelines for making decisions, the trader is merely making a guess. Some of the decisions will be right while others will be wrong. And the threat of losses always looms menacingly over the trader’s head. Using a trading system provides consistency and instructions that many traders find comforting. It is also proven to improve profits and reduce the uncertainty that causes stress.
  4. Use an Automated Trading System – this is similar to an ordinary trading system but takes it one step farther. An automated trading system uses defined parameters to enter and exit trades. The trades are entered and exited automatically. The trader does not need to be involved. Some traders find automated trading systems helpful because they don’t have to know how the currency pair is performing or whether the trade is profitable. Still, the trader should watch for the signs of trader stress (technique number 1) even though he/she has an automated trading system.
  5. Trade only certain currencies – there are dozens of currency pairs that can be traded. Chasing around pairs to trade can be quite stressful and very unprofitable. To control stress, the trader should focus on only 2 or 3 currency pairs like the EUR/USD or GBP/USD. In this way, the trader can do the proper research and learn the “personalities” of the currency pairs. Yes, trading opportunities will be missed by limiting the number of currency pairs, but many more opportunities will be found and they will be more profitable.

Reduce the Stress for Fun and Profit

The trading lifestyle can be exciting and stimulating. It can also be filled with frustration and stress. Taking simple steps can make Forex trading into a fun, healthy, and possibly profitable career. For more information about stress in general, check out the NHS site by clicking here.

About the author

Louis Charlton

Hi, I'm Louis! I am a home-based part time trader who has built up knowledge of the stock market in my spare time (whilst drinking a lot of coffee). I hope to pass on some of my knowledge to others who want to start in this field.

2 Comments

  1. Geoff says:

    Good read. Trading is causing stress, but it also gives us a lot of money 🙂

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