We need to discuss currency trading and how to deal with your emotions. Do you remember the scene in the movie Wall Street where Gordon Gecko (the epitome of stock or currency traders’ alter-egos) told his underling never to get emotional about a stock? Well, this is sound advice for stock market traders, but absolutely vital for those involved in currency trading on the foreign exchange market.

It is too easy to get caught up in a trade if you let your emotions get the better of you. You opened the currency trading position because you felt good about it, had a good hunch, a gut feeling, a strong belief, and you keep hanging in there despite the market moving against you. You just know the market will turn again, back again in your favor  – if you just hang in there, if you can just hang in there. Periodically it will, but generally rule, it won’t.

Didn’t that all sound a little desperate, a touch deluded? The problem was that you allowed yourself to become emotionally attached to the currency trade and your subsequent decision to stick with it was totally emotion driven. With such emotion attached to a currency trade, you see closing the position as some admission of ineptness. but you were wrong, you doubt yourself and your dumb, stupid decision to have opened the position in the first place. See the way self-talk can get to you?

Your trading currency in the Forex market must be driven in the first instance by market indicators. Your trading decisions have to be based firmly on what the indicators tell you and not, I repeat – not on what you are feeling. To be a consistently successful currency trader you must have your head ruling your heart.

You might find you develop an emotional attachment, or simply preference, for a specific currency finding that most of your currency trading happens to favor its behavior. That’s okay, that’s a preference, a familiarity, and a choice. Nothing’s wrong with that. You may sometimes even feel the time is particularly right to buy certain currencies. And that’s okay too. There is no mistake in following a feeling about trading a currency but mistakenly opening a position based purely on this feeling is the error.

Read Part 2 of trading Forex and your emotions  >>