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Apr 3
6.7 The Battle Against Human Nature

The forex trader behavior adjustment is important to overcome losses and make profitable strategy.
It is inherent of most people. You get into a trade that starts to do good. You see some profits accumulating and immediately plan your exit. Why? Because you start to fear that you will end up giving it back if you don’t take it quickly.
This is a problem for most forex traders. A forex trader finally learns the important lesson of keeping their losses small, and by doing so, they are able to take many trades over a longer period of time with a set amount of funds. But taking those small losses are never any fun, and it is likely that some of those losses, although small, were in profit territory shortly before moving into the loss column.
It is commendable when a forex trader has finally fought against his nature to stay in a trade when losses are accumulating, and has learned to exit quickly. But this is only part of the battle in BEHAVIOR ADJUSTMENT.
If profits are cut short whenever they appear, the best you can hope for is to be a breakeven forex trader. True, breakeven is well beyond that of a forex trader who continually wipes out his account. But you do not want to stop at this level, but strive to move on to the next level, that of a profitable forex trader.
One well known forex trader/author wrote of his own experience as a forex trader. For years, he pretty much took a beating from the markets. Later on, he ended up as a breakeven forex trader, having advanced enough to stay in the game. However, being a profitable forex trader continued to elude him. However, he writes that some things came together for him and soon he has been consistently profitable year after year for over a decade now. It simply points out an important point. To become a profitable forex trader requires that you achieve one level after the next. You need to go from a beginning forex trader to a losing forex trader, a losing forex trader to a breakeven forex trader, and if you persevere and make the necessary BEHAVIOR ADJUSTMENTS, to become a profitable forex trader. I must also add this one last level, consistently profitable forex trader.
Some forex traders learn how to become profitable, but then they find it hard to remain profitable on a consistent basis. Various reasons exist for this, such as changing what you were doing that was profitable. Circumstances change as well, such as family situations or your focus (what is important to you). Thus, further adjustments are necessary to either bring your surroundings back to the way it was when you were profitable, or to make changes within to deal with it. Failure to recognize the need for change or to make them will likely result in digressing levels.
Getting back to the nature of most forex traders: To take quick profits, needs to be overcome. To achieve the level of a profitable forex trader and the ultimate goal of a consistently profitable forex trader requires that you allow your profits to run. It is important that, if you do not have this in your current strategy, to work at adding it.
When you are in a trade that is moving into profit territory, how do you feel? Are you anxious to grab what you have and celebrate? Or do you feel dread that it might turn into a loss and so you exit to avoid this. How many times have you exited a trade with some profit only to see the market continue in the direction you were trading? I’ll bet for most forex traders sometime in their trading career, they’ve seen this more times than they care to be reminded of.
Learn from your past mistakes while you can. Note that it is important to fight against our human nature for instant gratification. Learn to go for the long haul, even if you are a short-term forex trader. Modify your exit strategy to accommodate this necessary adjustment in your behavior pattern.
SUGGESTIONS FOR HOLDING ON :
It is important that you devise a strategy to keep you in the trade longer. You must be determined to stick with the strategy no matter what. Obviously, it is best you back test this strategy so that you can be confident that it has a good chance of working for you. Confidence in your strategy will be of the utmost importance if you are to follow it against your nature to get out quickly with a small profit.
There are various ways to approach this. One strategy would be to use a moving average indicator that you can instantly note, using back data, whether it is usually above or below trending prices. You’ll want to avoid setting the moving average to where it is to choppy or that price tends to break through it often. Remember, you are looking to stay in much longer than you are accustomed to. Adjust your moving average indicator so that it won't give too much back when price finally breaks below it (if long).
Another approach is using the characteristics of a trend. A bull trend tends to form higher swing bottoms, one after the other. Think of swing bottoms as retracement bottoms. Price moves up and makes a top, retraces back down a fraction of the previous move up and forms a bottom, then resumes the upward move. Those swing bottoms in a bull trend are excellent places to move up your stops. Just keep in mind that you'll eventually give back a percentage of the last range up with this strategy.
Another tool to stay in trades longer is the trend line breakout strategy. Once you’ve established the market is trending up, for example, you can draw a trend line and use that to hide your stop loss order. You’ll simply move your stop-loss up each day while price remains above it. Once price moves below the trend line, you are out of the trade. What this will do, just like the prior suggestion, is keep you in the trade even when prices are temporarily moving against your position.
If you want to stay in your trades the longest, plan to trade in the direction of the weekly trend. This will make the previous exit strategies work the best.
Conclusion :
The key to successfully profiting in this environment is to do more than offset a series of small (or even large) losses. And if you are used to more losses than wins, this becomes even more important. Battle against your human nature to cut profits short and let losses ride. If you haven’t mastered cutting your losses short, get that worked out quickly. But if you are like many forex traders who have been at this business a long time but only able to remain in breakeven status, be happy you mastered cutting your losses short, but realize that you now need to let those profits run. Your profitable trades need to be large enough to not only cover those previous small losses, but to add equity to your account for the coming losses sure to arrive. BEHAVIOR ADJUSTMENTS are never an easy thing to do. You’ve been the way you are for such a long period of time that it is not likely you will change overnight. However, you can make these adjustments if you want to bad enough, and the success of many testifies to this fact.

The forex trader behavior adjustment is important to overcome losses and make profitable strategy.

It is inherent of most people. You get into a trade that starts to do good. You see some profits accumulating and immediately plan your exit. Why? Because you start to fear that you will end up giving it back if you don’t take it quickly.

This is a problem for most forex traders. A forex trader finally learns the important lesson of keeping their losses small, and by doing so, they are able to take many trades over a longer period of time with a set amount of funds. But taking those small losses are never any fun, and it is likely that some of those losses, although small, were in profit territory shortly before moving into the loss column.

It is commendable when a forex trader has finally fought against his nature to stay in a trade when losses are accumulating, and has learned to exit quickly. But this is only part of the battle in BEHAVIOR ADJUSTMENT.

If profits are cut short whenever they appear, the best you can hope for is to be a breakeven forex trader. True, breakeven is well beyond that of a forex trader who continually wipes out his account. But you do not want to stop at this level, but strive to move on to the next level, that of a profitable forex trader.

One well known forex trader/author wrote of his own experience as a forex trader. For years, he pretty much took a beating from the markets. Later on, he ended up as a breakeven forex trader, having advanced enough to stay in the game. However, being a profitable forex trader continued to elude him. However, he writes that some things came together for him and soon he has been consistently profitable year after year for over a decade now. It simply points out an important point. To become a profitable forex trader requires that you achieve one level after the next. You need to go from a beginning forex trader to a losing forex trader, a losing forex trader to a breakeven forex trader, and if you persevere and make the necessary BEHAVIOR ADJUSTMENTS, to become a profitable forex trader. I must also add this one last level, consistently profitable forex trader.

Some forex traders learn how to become profitable, but then they find it hard to remain profitable on a consistent basis. Various reasons exist for this, such as changing what you were doing that was profitable. Circumstances change as well, such as family situations or your focus (what is important to you). Thus, further adjustments are necessary to either bring your surroundings back to the way it was when you were profitable, or to make changes within to deal with it. Failure to recognize the need for change or to make them will likely result in digressing levels.

Getting back to the nature of most forex traders: To take quick profits, needs to be overcome. To achieve the level of a profitable forex trader and the ultimate goal of a consistently profitable forex trader requires that you allow your profits to run. It is important that, if you do not have this in your current strategy, to work at adding it.

When you are in a trade that is moving into profit territory, how do you feel? Are you anxious to grab what you have and celebrate? Or do you feel dread that it might turn into a loss and so you exit to avoid this. How many times have you exited a trade with some profit only to see the market continue in the direction you were trading? I’ll bet for most forex traders sometime in their trading career, they’ve seen this more times than they care to be reminded of.

Learn from your past mistakes while you can. Note that it is important to fight against our human nature for instant gratification. Learn to go for the long haul, even if you are a short-term forex trader. Modify your exit strategy to accommodate this necessary adjustment in your behavior pattern.

 

SUGGESTIONS FOR HOLDING ON :


It is important that you devise a strategy to keep you in the trade longer. You must be determined to stick with the strategy no matter what. Obviously, it is best you back test this strategy so that you can be confident that it has a good chance of working for you. Confidence in your strategy will be of the utmost importance if you are to follow it against your nature to get out quickly with a small profit.

There are various ways to approach this. One strategy would be to use a moving average indicator that you can instantly note, using back data, whether it is usually above or below trending prices. You’ll want to avoid setting the moving average to where it is to choppy or that price tends to break through it often. Remember, you are looking to stay in much longer than you are accustomed to. Adjust your moving average indicator so that it won't give too much back when price finally breaks below it (if long).

Another approach is using the characteristics of a trend. A bull trend tends to form higher swing bottoms, one after the other. Think of swing bottoms as retracement bottoms. Price moves up and makes a top, retraces back down a fraction of the previous move up and forms a bottom, then resumes the upward move. Those swing bottoms in a bull trend are excellent places to move up your stops. Just keep in mind that you'll eventually give back a percentage of the last range up with this strategy.

Another tool to stay in trades longer is the trend line breakout strategy. Once you’ve established the market is trending up, for example, you can draw a trend line and use that to hide your stop loss order. You’ll simply move your stop-loss up each day while price remains above it. Once price moves below the trend line, you are out of the trade. What this will do, just like the prior suggestion, is keep you in the trade even when prices are temporarily moving against your position.

If you want to stay in your trades the longest, plan to trade in the direction of the weekly trend. This will make the previous exit strategies work the best.

 

Conclusion :

 

The key to successfully profiting in this environment is to do more than offset a series of small (or even large) losses. And if you are used to more losses than wins, this becomes even more important. Battle against your human nature to cut profits short and let losses ride. If you haven’t mastered cutting your losses short, get that worked out quickly. But if you are like many forex traders who have been at this business a long time but only able to remain in breakeven status, be happy you mastered cutting your losses short, but realize that you now need to let those profits run. Your profitable trades need to be large enough to not only cover those previous small losses, but to add equity to your account for the coming losses sure to arrive. BEHAVIOR ADJUSTMENTS are never an easy thing to do. You’ve been the way you are for such a long period of time that it is not likely you will change overnight. However, you can make these adjustments if you want to bad enough, and the success of many testifies to this fact.

 


Emotional & Behavioral Part

 

6.1 Trading Psychology

6.2 Trading Like A Pro

6.3 Psychology Of The Market

6.4 The Psychology Of Individual

6.5 Keep A Cool Head

6.6 Mind Over Profits

6.7 The Battle Against Human Nature

6.8 Face the Truth of Forex Trading

6.9 Overcome The Barriers Of Trading

6.10 Expectations Vs Reality In Trading

 


Forex Education

 

The Basics of Currency Forex Trading

Technical Analysis

Technical Indicators

Fundamental Analysis

Intraday Trading

Emotional & Behavioral Part

Risk & Money Management

Trading Guide