The foreign exchange market is one which is growing in popularity due to its lucrative nature. If one learns to trade effectively the chances of many profitable trades with little effort increases dramatically. However, just as profits can cause a trading account to increase dramatically so can losses lead to depletion of the account. It has been noted that the monetary loss is not always the greatest difficulty traders’ face; instead it is the psychological effects this loss has on the trader. In order to cope with this problem one must be aware of the different coping strategies available to one if you were to find yourself in this state of crisis. This article reviews the most commonly used coping strategies among forex live traders today. It should be noted that while a particular strategy may work for one person it may not work for another due to incompatibility with a personal trading style.
The most effective forex live coping strategies available
Potentially the most effective method of handling psychological stress is learning from your mistakes. By understanding the loss is in the past and cannot be altered is a great motivator to moving forward. Furthermore, by identifying this and ensuring you use this mistake to better inform your future trades will make you a more successful trader. Remember, there is no quick fix to anything and acknowledging your mistake is just one step. To truly handle the loss you must apply your knowledge and integrate it to your trading strategy. For example, if you incurred a loss due to overtrading it is best you note the excessive trading and steer clear of it.
Intellectualisation is another profitable strategy. This economical term is a philosophical concept and focuses on the acceptance that trades go bad and there is nothing you can do about it. Thinking is not overrated and will ease your psychological distress.
The final forex live coping method is saving money by spending less. A loss will create debt or a large hole in your bank account. By reducing expenditure, you will quickly fill the hole.
The most inadequate forex live coping strategies available
Just as there are positive, effective coping strategies to manage one’s losses and their effects, there are also dysfunctional defence mechanisms which hamper healing. Suppression is the most well-known negative coping strategy. It is the behaviour whereby one avoids thinking of the loss and all associated features. Suppression creates more complicated inner turmoil which leads to depression and anxiety disorders. This not only causes psychological difficulties, but can also affect an individual’s trading abilities.
Another common defence mechanism is projection. This is an intrinsic mode of behaviour and occurs when a person transfers the emotions and behaviours onto another individual.
The final mechanisms are delusion and denial. This approach always leads people to the belief their trade will regain strength and it is best to hold onto it rather than risk the loss.