When things aren’t going your way, and sometimes even when they are, it can be difficult to control your emotions and get carried away. Every forex trading expert in the world will tell you that this is a bad idea.
Trading financial markets requires you to be completely objective; you must look at every situation in the same way, using the same criteria.
As an example, you might find that you’re in a losing position, and things are only getting worse.
You’re frustrated, and get the feeling that your luck must be about to turn. That chart will soon start moving in the right direction, and you’ll be right back to a profit. The truth is, there is no luck in forex, and having a feeling about something is the worst way to trade. If your signals don’t point to something, then cut your losses. Don’t enter another trade with the aim of immediately recouping your losses either; only ever speculate when you have solid evidence.
Stress can make you make rash decisions, and overlook details, which can be the elements that make a position profitable or unprofitable. Only trade when you’re level headed and can make informed decisions.
Attachment is a problem is usually associated with stock markets, whereby investors are overly faithful in a particular company, but can affect forex traders too. This is a foolish way to trade; you should not be emotionally attached to a financial instrument. Just because you’ve traditionally had
success with a currency pair does not mean that it will always come good for you.
The key point to remember is that you should only open or maintain a position when you’re looking at the situation objectively, and properly understand any risks.