Should You Trade Forex Like a Robot?

Perhaps during this century more than ever before, society is willing to bravely discuss emotions and mental health.

I believe this is a milestone for humankind and a boon to evolving as a global society that seeks to achieve peace and continue to make technological and social progress.

I also believe that taking care of your mental health is crucial to your success as a day trader. Whether this means learning stress reduction techniques or meeting with a physician to discuss options for medication, you can make your trading sessions (and not to mention, all other areas of your life) far more comfortable and easier to manage when you prioritize your mental health care instead of avoiding it.

However, when it comes time to read the charts or set your trading order, emotions have a way of doing more harm than good.

Unless you’re seeking to become the next Paul Tudor Jones, trying to trade based on a “gut-feeling” for what the market is going to do next will more likely drain your account than develop your trading skills.

For us retail traders, who have limited access to the kinds of information that power the biggest funds in the market, we will likely depend on the technical analysis of price-action or indicator strategies in order to organize our approach and make some profit.the seven habits of successful day traders andrew bloom

If you follow the habits of successful day traders, you likely have a strategy and plan that tells you what you do during different market scenarios or at different stages of profit or loss in your account. You also have a checklist and routine that governs your trading session.

With these pre-planned rules and guidelines, combined with a strategy that is backtested or forward tested for profitability, you should have everything you need to be able to conduct a responsible trading session.

During that time in front of the charts, your emotions are not invited to join you. It is in your best interest to trade like a robot.

Why should you trade like a robot?

Consider these attributes of successful traders:

  • Winners think statistically – they know that no single loss or single win makes any difference in the long term. It is the series of wins and losses over weeks and months (or years, for swing traders) that determine the strength of a strategy
  • Winners know that a profitable strategy can still come with strings of losses (even up to 10 in a row)
  • Winners are patient and take only the high probability setups (consider trend-trading if you don’t know where to start)
  • Winners are willing to do nothing if the appropriate setups and rules aren’t aligned
  • Winners don’t try to predict the future
  • Winners reflect their understanding of risk and the inevitability of losses by limiting their risk on each trade to 2% or less (the larger the account, the smaller the number)
  • Winners develop confidence from backtesting (gaining statistical knowledge about the strategy) and by following rules
  • Winners focus on consistency

Emotion is not necessary to make any of the decisions involved in a well-thought-out trading plan. A trader builds skills to help manage randomness, your mind’s least favorite bedfellow.

forex trade like a robot

In this way, the point of learning about and developing your psychology while trading involves being able to override your human natural instinct to want to protect your money during your attempt to make more money.

However, it’s no easy task to subdue your emotions while you have money on the line. It will take many encounters with your emotions and having the courage to override them time and again in order to get to a status of discipline. Don’t worry, the pain of your failures will help this, too.

Here are some additional things you can do in order to minimize your emotions’ influence on your trading:

  • Make sure you are risking an amount that you are comfortable losing at least 5x in a row (if you want to be more realistic, make it the amount you’re comfortable losing 10x in a row)
  • Have hobbies and interests that give you a sense of self-worth which have nothing to do with trading
  • Have over streams of income so that your basic needs are not dependent on your profits
  • Before you trade each session, visualize yourself losing all of your setups and feeling okay with that because you’re proud of following your rules
  • Visualize yourself winning and only being proud about following your rules – not the fact that you made money
  • Consider losses as the normal operating costs of doing business in the trading industry (Every business has costs – for example, DFX has subscription fees for various software licenses) and as long as your “sales”, your winning trades, outweigh your losses, you’re in profit
  • Focus on %, # of pips, or R multiples, not dollars when tracking your progress

 

Psychology is the greatest factor in your trading success, followed by risk management, and lastly, your trading system. Continue to take time to learn about and be positively influenced by successful traders who talk about this key skill.