Can it really be as simple as “Ready – Aim – Trade?” Truth is, it HAS to be that simple!
I confess to a love of John Wayne westerns, some of which I think, are great entertainment. One I like in particular is “The Shootist”.
In it, an ailing old gunslinger named J. B. Books (played by Wayne) retires to a small town where he meets a young man named Gillom. Gillom is in awe of the old gunslinger, and seems to be thinking about a career in that direction himself.
Books is not particularly supportive of this ambition, but somewhat grudgingly takes the younger man under his wing.
In one scene, Books is showing Gillom how to shoot straight. He empties his gun into a target and then bids the young man to have a shot at it.
Gillom actually shoots a little more accurately than Wayne, and points this out. He also asks his mentor something along the lines of “how come you had such a career as a gunslinger if you’re not an ace shot?”
Books’ reply is an absolute classic, and especially applicable to the problem of pulling the trigger as a trader. He says:
“First thing is, that target wasn’t shooting back at you. Second, most men at that last second will flinch; I won’t.”
That quote sums up both a particular problem many beginning forex traders encounter, and part of its solution.
Ask yourself how many times you’ve gone to put on a trade when the market has given appropriate signals for your system, only to pull out at the last minute.
Perhaps you’ve gone hunting for more confirmation factors. Perhaps you’ve read a news announcement an hour back that makes you think your proposed bullish trade won’t go anywhere as the announcement was bearish for the currency pair you want to place a trade on.
Whatever it is, you hold off, waiting for another move in the market to confirm the signal that your system gave. Lo and behold, the market does give a confirmation signal. Trouble is, it’s such a strong signal that you’ve missed the entry and the market moves off without you.
The counter scenario to this is where you become so nervous about putting on trades that you actually begin to flinch-pull the trigger.
This happens when – perhaps having missed several entries as per the previous scenario – you start taking trades that are marginal, that is to say you start pulling the trigger every time your system gives some, but not all of the signals you would normally require to enter a trade.
As you know, this is just as disastrous, perhaps more so than missing trades entirely.
You’ve become like the classic bad guy character in a western movie who, cornered like a rat, starts firing off shots in the direction of every noise he hears or movement in his peripheral vision.
This guy becomes easy prey for his opponent in the white hat: the good guy cowboy knows he only has to throw a stone to distract the bad guy, and this will give him a clear shot at the villain.
Unfortunately, in the trading scenario, you have become the villain and you are the one who gets shot!
You may have guessed already what is behind both these behaviours. It’s Fear, of course.
In the first instance, you’re fearful of entering a trade that eventually becomes a loser. In other words you fear Loss. In the second scenario, you’re fearful of missing out on winners. Some say this is the flip side of fear: Greed. Personally, I think that’s not just a little harsh, but plain wrong thinking. In both cases, it is Fear that has caused you to abandon trust in your chosen, tailored and proven trading system/strategy.
(I am assuming you have at least got to the stage in trading that you understand the need for such a system. If not, I suggest you take a look at the other pages of this site, beginning with the Home page and progressing through those under Forex School)
What causes fear? Psychiatrists could write encyclopaedias on its many causes (I fear some do!) and still miss an explanation of what causes YOUR fear. The important thing – now that you’re aware of what is causing you to miss good trades and rush headlong into bad ones – is what you can do about it.
There are a great many psychological tricks and processes you can practice in order to overcome fear generally. I will be covering these (mostly in the psychology section) over time. Some of them include meditation, trader mentoring, writing a trade plan, goal setting etc.
The important thing for now is an immediate fix for the problem! This comes down to nothing more or less than ratcheting down the things that cause your fear to rise. For most traders this is a matter of reducing risk. A lot of beginning traders are way over leveraged. They are more focused on how many dollars they can make out of a trade than on actually trading well.
Then, they suffer a series of losses, which induces psychological wounding that leads to errors of judgement in trade placement and management, leading to further losses, more psychological wounding and ultimate trader breakdown.
If you are struggling with the issue of pulling the trigger on trades, either through being fearful of pulling the trigger or through being trigger-happy…
REDUCE YOUR RISK NOW!
There is simply no better solution to the problem of fear than to have nothing to fear. If you reduce the amount of money you risk on any one particular trade to a negligible amount, you will be much more psychologically able to enter and manage that trade.
Don’t worry about not making money for now. Conquer your fears, gradually increase the amount of risk you have in a trade over time as your trading performance improves, and the money will come as it should: in a natural, incremental manner. Success in the forex markets does not come overnight, except in the case of someone who will surely also soon lose it overnight!
Perhaps it is not fear of loss but some other psychological problem that is causing you to have pull-the-trigger trading problems. It may be that you have too much ego involved in your trading success. Perhaps you are trading to be able to brag to people about your success, for whatever psychological reason.
These problems I’m afraid to say, are a lot harder to deal with. In such cases, reading any article on a website is unlikely, on its own, to provide a solution. My best advice in this case is to seek psychological counseling or perhaps even better, one-on-one trader mentoring with a trading coach who has the appropriate skills and experience to help. There are several people cited in the Forex Trading Psychology section who will either be able to assist, or point you in the right direction.
Learning to pull the trigger on a trade at the appropriate moment and how to avoid trigger-itch problems that get you into inappropriate trades is fundamental to forex trading success. If this is a blocker for you currently, address it now before you go on to anything else. If you don’t, I guarantee it will kill your account over time.
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