We have a great question from one of our fellow traders in today forex faq session. I believe that this is one question that most of you have in your mind.
Below is the question:
I thank you for all you have shared since I subscribed to your newsletter. I have started using what I learnt on my demo already. you are a good teacher. My question is, how can I overcome the element of fear in trading, should I open a trade then enter my take profit/stop-loss and shut down. What do you advice?
I believe that you are having the problem of adjusting your stop loss or target profit when you are trading. When you see the price getting closer to your stop loss, you tend to have the urge to extend your stop loss so that it will not be triggered. When you see the price giving you some profit, you also have to urge to get out of the trade to make some small profit as you are afraid that the price will eventually move back and stop you out.
This is a common problem among new traders. In fact, I used to have this similar problem when I first started trading a few years back.
This problem arises because new traders are more concerned about making money than protecting their capital. You do not mind shifting the stop loss to a bigger position so that you will not stop out. However you are exposing your capital to a greater risk. In fact a professional trader is more concern about protecting his capital than making money.
A professional trader will shift his stop loss to breakeven after the price has moved by maybe 20 to 30 pips in his direction. He is willing to take the risk of making zero profit if the price reverse back and then move in his direction making him more profit rather than losing his capital.
Another reason why most new traders have this problem is because they do not trust their trading strategy. If you have a winning strategy, you will not have this problem. You will not mind getting stop out once in a while as you have confidence that you will be profitable at the end of the month with this strategy.
My personal advice to you is to do a back test for your strategy for at least the last 6 months to see if it is profitable every month. If it is indeed profitable for the past few months, you know that this strategy is reliable. If it is not, you better start to find another working strategy to use.
Once you have a working strategy, you should stick to it. Once you have entered your position, you should never touch the stop loss or target profit. The only time you meddle with your stop loss is when you want to shift it to breakeven to protect your capital.
This whole thing requires confidence in your trading strategy as well as discipline in yourself. However if you want to be a successful trader who make a living trading, you have to overcome this fear.