Impulsive trading something that all traders struggle with at some point in time, some more than others. And, more often than not it’s these impulsive trades that turn out to be losers.
That in itself isn’t surprising though, especially considering that an impulsive trade is a trade without a plan. And that’s not really a very good way to conduct business.
So, how can we mitigate the likelihood of trading impulsively?
Let’s find out.
Not having a trading plan is without a doubt the greatest cause of impulsive trading. Without a plan at the start of each week or day, how do you know what to trade? Or even what to watch?
The answer is simple. You won’t! That’s why it’s absolutely crucial that you spend some time each weekend or evening going through charts, drawing your levels and putting together a solid plan for the coming sessions.
All too often, Forex ‘traders’ make the excuse “I’ll do it later”, or, “I don’t even know what a trading plan should look like”, or even, “My trading plan is in my head”.
Let me tell you, as cliché as it sounds, failing to plan is planning to fail. End of story!
Whilst there’s no one-size-fits-all way to compile a trading plan, there are plenty of options out there. It can be as simple as scribbling some notes in a book, or using an online journal. I used to just print out some charts and draw on them which I found particularly effective, and also very beneficial to review post-trade.
By now, it shouldn’t come as any surprise that I’m particularly fond of viewing the bigger picture by trading daily charts.
The major advantage in trading the daily charts is that it removes the temptation to make rash, impulsive trading decisions. It simply slows things down so you have plenty of time to assess what’s in front of you and make a calm, collected, and informed decision.
Plain and simple, if you want to avoid impulsive trades, stick to the daily chart.
If there’s one lesson to take away from this post, it’s that the more time you spend staring at charts, the more likely you’ll be to make impulsive trades.
Yes, I know you became a trader so you can trade, and it’s perfectly natural to want to find setups to put your capital to work.
This results in you staring at a screen actively searching for something to do, irrespective of the market conditions.
So, if you want to give your trading a significant nudge in the right direction, you need to scan for setups… not search for them.
What’s the difference? Well, if you’re searching for a trade setup, you’re training yourself to be dissatisfied until you find one. You feel like you have to put on a trade rather than exercising the patience and discipline required to wait for a setup.
The thing is, and it sounds counter-intuitive, but you don’t have to trade. If there aren’t any setups, come back tomorrow… simple. When you lose the intention of finding setups and instead, allow them to find you you’ll notice a significant reduction in your impulsive behaviour.
Let’s wrap it up
It’s easy to convince yourself that rather than seeing risk, you’re only noticing opportunities pass you by, which isn’t a very constructive mindset.
By sticking to the 3 points above you’ll be able to reduce the number of impulsive decisions you make day-to-day.
All you really need is one or two good trades a month to make a considerable profit when trading the Forex market. Let the setups come to you and never chase the market. There’ll always be another trade setup just around the corner.
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