How To Vanquish Your Trading Villains

Often as a Forex trader, you may feel that you’re possessed by a trading ‘villain’ every now and then… as if you’re not the one controlling your actions in the market. You notice yourself entering trades that aren’t part of your plan, exiting when you know you shouldn’t or risking far more than you know perfectly well that you should. During times like these it can seem very much as if you have no control over your own actions in the market… as if you’re possessed.

Today, we’re going to go through and identify the most common trading villains that can take over your mind, and then give you what you need to get rid of them, once and for all. To do this, we need to focus on taking something that’s negative and turn it into a positive, so you can get back to developing as a successful trader.

Trading Villain # 1. Hesitation

All too often we see a potential trade setup and think to ourselves that “it’s perfect”. Then, instead of doing what we should, Ie, setting up and waiting until it triggers, we start looking at smaller timeframes and think “ooh, this looks quite different here”, and think “Maybe I shouldn’t take this setup this time, the one hour chart looks like a downtrend, even though I trade the daily time frame and it looks fine.”

So, you’ve now decided that you’re not going to take the trade after switching timeframes multiple times and looking for a way to rationalise it to yourself in some way, shape or form, even though the setup is there on the daily chart screaming “TRADE ME”, and objectively you know that it’s a great setup. This is a classic example of the hesitation villain infecting your mindset and leading to destructive behaviour.

Scenarios like this one are typically a significant reason for traders losing. They over think, lack the confidence, generally just let the negativity in and take over.

Trading Villain # 2. Cockiness

Letting cockiness take over your mind is not only hard to recognise, but can cause you to spiral out of control and say ‘kaput’ to your trading balance.

This generally starts to occur after a nice streak of winners, or a BIG win (that you probably risked too much on), and then a trader begins to feel invincible, thinking they’ve finally figured out the Forex market. Oh dear, how wrong you are.

It’s quite widely reported that a significant majority of traders overestimate their abilities and returns in the market. Interestingly, it was Charles Darwin how said “ignorance more frequently begets confidence than does knowledge.” Translation: You confidence is more likely ignorance as opposed to knowledge.

Instead of falling victim to your own inflated ego, learn how to trade properly. As Mark Minervini famously said, “The formula for success is: 1. Admit you suck. 2. Believe you can be great. 3. Find someone great. 4. Shut up and listen.

Don’t let arrogance lead you down a profitless path. The market has a particular knack of humbling everyone at least once in their career. Instead, soak up the knowledge of those who have made all the mistakes there is to make.

Trading Villain # 3. Fear

So, you want to stop being scared of taking a trade? There’s one super simple way that pretty much eliminates all fear from your trader’s mindset.

All too often, traders become too fearful of taking a trade because they tend to be scared that it won’t be a winner, or they’ll lose money. What’s not quite understood by them, is that both fears a irrational and outline a distinctly poor understanding of the realities of trading. Being scared of a trade that won’t win is cured by the realisation that there is a random distribution of wins and losses for any trading system with an edge. If you’re managing your risk properly and understand that losses are a part of the game, there should be no fear when it comes to pulling the trigger.

Now, to combat this fear. The ONLY real way to eliminate this fear is to trade a smaller size. Don’t risk as high an amount of money and you’ll find you’re not afraid anymore. See, the fear stems from the idea that you’ll lose your hard-earned cash, often arising after a couple of recent losses in which risk wasn’t properly managed, resulting in a hefty loss.

Before we’re traders, we’re risk managers. The preservation of our capital is key so that means we need to trade in a manner that allows us to fight another day. Even after a series of losses. The litmus test is “can you sleep?”. If your mind is actively thinking about the positions you have open then you’re not focussed on trading, you’re focussed on the money risked.

Trading Villain # 4. FOMO/Regret

As if you needed to hear another thing that can wreak havoc on your trading, but yep, here we go. Regret!

I’m sure you’ve found yourself flooded with some form of regret after not entering a trade that you wanted to be in. Or, a trade that you exited too soon. Or, not sticking to your stops. However this regret manifests itself, it needs to be eliminated in order for it to stop hurting you. Because if you don’t, say ‘bye bye’ to your bottom line.

So, how do you stop being controlled by FOMO & regret? It begins with a well thought our trading plan that you follow with the utmost discipline. Whenever you deviate from your trading plan you’ll very quickly find yourself in a situation where regret can sneak in. Say you don’t take a trade that fit perfectly within your strategy or plan because you hesitated or were scared? You’ll likely regret it. Sadly, this trading villain is often followed by our 5^th Forex trading villain, revenge.

In order to be successful as a trader, you really need to have nerves of steel as well as the ability to be able to move on without hesitation. As soon as you start letting previous trades influence your next decision, you’re becoming an emotional trader as opposed to a systematic trader. It’s important to remember that no matter what, the market will always be there tomorrow and other trades will come along.

Trading Villain # 5. Revenge

As touched on ever so briefly above, regret can lead to the manifestation of revenge. Trading with revenge in mind is a sure way to evaporate your capital.

Revenge tends to sneak in after regret (as mentioned above), or often after a significant loss. Often you might feel angry about missing a good trade because hesitated, or whatever the reason. Maybe you exited too soon, or traded to big a size.

Revenge trading is often done with haste and quite often, with too much money risked. With revenge trading, normally a trader feels compelled to ‘make back’ the money they just lost or missed out on. Almost certainly, revenge trading leads to even more loss, and this can become a vicious cycle of more revenge trading until this vicious trading villain munches all your money.

So, what’s the best way to say sayonara to revenge trading? It sounds incredibly simple, and with discipline it is… DON’T stray from your trading plan. It’s easy. Don’t take stupid trades that aren’t part of your strategy. Don’t trade a size that’s outside your risk management strategy. Now’s the best time to start exercising more vigilance with adhering to your strategy faultlessly.

Trading Villain # 6. Hope / Greed

I reckon that ‘hope’ is one of the last things that comes to mind when you think of trading villains, but give me a sec to explain.

This sounds bold, but hope is essentially the epitome of evil to traders. How many times have you been in a trade and instead of taking profit at your planned level, you move your target further because you’re HOPING it will keep going because of greed?

Hope and greed tend to be closely related when it comes to the market. People get greedy when they’re most hopeful. Whether it’s hoping that more trades equal more money, or huge risk equals huge reward, it’s greed that’s making them hope, and hope that’s making them greedy.

A well-known trading idiom goes something like ‘Bulls make money, Bears make money, and Pigs get slaughtered’. Loose translation = If you’re greedy, the market will slaughter you.

The thing with trading is that money is a by-product of following process. Trading is more about doing the right things in order to win, and that typically means it’s not only boring because you’re not trading excessively frequently or at a risk that causes anxiety. After all, it’s a game of capital preservation and patience.

Trading Villain # 7. Ignorance

Last but by no means, least, is ignorance. This one is probably the easiest villain to diagnose because an ignorant trader quite simply, won’t make any money.

With ignorance, the trouble is that hardly anyone is really able to recognise that they’re being ignorant. All too often they’re studying the wrong things, like millions of indicators, and obsessing about scalping, wasting countless hours without a penny’s profit to show for it. But alas, dear traders, there’s a much simpler and intelligent way.

Knowing that you have absolutely zero chance of controlling the market is vital, understanding that you can only control yourself is even more important. When you can start to focus on controlling yourself instead of the market, you’ll have no trouble letting go of useless indicators and scalper fantasies, because all these things do if give you an illusion of control. All you’re doing is over-complicating the technical analysis process.