This is one of the most common reasons that people fail in trading. Unfortunately, it's also a natural human response.

I've been studying trading psychology for over 15 years, and I'm going to share with you what revenge trading is, what causes it, and the best ways that I've found to stop it.

Revenge trading is an emotional response to a losing trade or a series of losing trades. Traders that engage in revenge trading will try to make up their losses quickly. This leads to even larger losses, and can result in losing all of the money in their trading account. 

Some people think that only big losses lead to revenge trading.

This is not true. 

Even the smallest loss can trigger this behavior.

Here's why…

The 8 Causes of Revenge Trading

It can be hard for some traders to keep themselves from taking more trades, when they know that they should stop.

This is because trading can evoke some of our deepest, darkest, most primal emotions.

Revenge trading is caused by a loss of emotional control. There are 8 underlying mindsets that will trigger an emotional reaction that can lead to revenge trading. 

1. Anger

Some people have a tendency to get mad easily.

This is a strong innate personality trait for some, and for others, it's a product of their environment.

When people are stressed or tired, it's easy to get mad at the smallest things.

That causes them lash out at the market, in attempt to “get even.”

2. Greed

I think it's pretty safe to say that almost everyone gets into trading because they want to get rich quickly.

Successful traders eventually figure out that you can get rich over time.

But there's really no way to get rich quickly.

When traders try to make money too quickly, they want to get revenge for losing trades, instead of letting a positive edge work itself out over time.

3. Poverty Mindset

When you feel like you're poor, you'll have the need to “catch up” to all the time.

In order to do this, many traders take way more risk than is reasonable.

This leads to trying to make up for losses by stubbornly sticking to trading ideas that aren't working.

4. Fear

There are 2 types of fear that leads to revenge trading.

First, there is the fear of missing out.

To get revenge for a missed trade, some traders enter trades way too late and usually end up with a losing trade.

The other type is the fear of losing gains.

Traders have the tendency to close trades early to protect gains.

Sometimes that works out for the best. But many times the trade takes off, leaving the trader to regret the missed gains.

In order to get revenge for those missed losses, traders can take another trade on the same setup, or double down on the next setup.

5. Shame

Some traders have a lot of pride and don't want to experience the shame of telling their friends and family that they are losing money trading.

So in order to make up for their losses, they will take more risk on every successive trade, to try to make up for their losses.

Of course, that only leads to bigger losses and usually ends in a loss of the entire account.

6. Lack of Awareness

Have you ever started driving in your car, then wondered how you ended up at a destination?

I've certainly done that a few times.

Obviously, the reason why that happened was because I was thinking about something else and was not aware of where I was driving.

The same thing can happen in trading.

When traders don't track their losses and aren't aware of their emotional states, then they won't realize when they aren't following their trading rules and they are revenge trading.

7. Overconfidence

On the surface, trading looks really easy.

Just click a few buttons and make some money.

You don't even have to get out of bed.

Of course it's not that simple. 

But some new traders think that it is.

They have the false belief that all they need to do is follow a magic trading strategy on YouTube and they will start making money.

When someone thinks that something is easier than it actually is, they will have a skewed perception of the risk and will usually try to make everything back on the next trade.

8. Not Knowing the Probabilities of a Trading Strategy

Finally, many new traders do not know how their trading strategy should perform, or even if it has an edge or not.

So when they lose 2 trades in a row, they freak out and double down on their next trade to make it back.

Some very profitable trading strategies have a win rate that's less than 40%.

But if a trader doesn't know that, they have a significantly higher risk of blowing out their account if they try to make their losses back on a failed trade, instead of waiting for the next trade.

How to Stop Revenge Trading

Now that you know the causes of revenge trading, let's look at practical ways to stop yourself from doing it.

There are three categories of actions that you need to take to stop revenge trading. You have to understand why you do it, be aware of the events that lead up to it, and learn ways to stabilize your emotional state.

Some people think that it's as simple as telling yourself: “Just stop doing it.”

But nothing could be further from the truth. 

Revenge trading is a very strong impulse for many people, so don't get discouraged if you cannot change your behavior right away.

Be patient with yourself and strive to get a little better during every trading session.

It's going to take as long as it takes for you, so don't compare yourself to others. 

Keep at it and if you're honest with yourself, you'll start to see improvements.

Here are 9 practical strategies that you can implement right now to prevent revenge trading.

1. Take a Break or Trade Smaller Until You Figure Things Out

If you think that you might start to revenge trade or you might already be revenge trading, the solution is to stop trading. 

Close all of your positions, if necessary.

This pause will allow you to step back and see your trading more objectively.

If you don't want to stop trading altogether, then trade much smaller positions until you get back on track. 

For example, let's say that you currently risk 2% per trade. You might want to temporarily scale that back to 0.5% risk per trade.

Trading a smaller size will allow you to stay in touch with the movements of market, while reducing the chance that you'll do significant damage to your account.

Using nano lots is a great way to scale down your Forex trading and take exactly the same amount of risk on every trade.

If you trade futures, you can scale down to mini contracts.

Trade fewer shares of stock.

Once you're confident that you won't revenge trade, you can go back to your normal position size.

2. Develop More Awareness While Trading

All change starts with awareness of the issue. 

The first step to changing any behavior is to be aware of what you're doing. But this is often easier said than done.

This is because there is usually something that sets you off…a trigger.

Once that trigger fires, it sets off a chain reaction of actions and emotions that are currently beyond your control.

You might not even be conscious of what you're doing until it's too late. 

That's what makes emotional trading so dangerous.

When you finally regain awareness, it's usually too late because you've already lost a ton of money.

In the case of revenge trading, the trigger could be a bad day at the office, losing a trade when you're tired, or a loss on a certain stock or currency pair.

So get in the habit of keeping a journal of your thoughts and emotions while you're trading.

It helps to journal throughout the day, so you can get an idea of what kind of things lead up to a revenge trading session.

Use a paper notebook or an app on your phone, whatever works for you.

If you don't like to write, record your voice.

The specific tool you use doesn't matter.

Record your thoughts in a way that's easiest for you and review them later.

3. Review Your Strategy, Execution and Market Conditions

Ask yourself 3 questions:

1. Is your trading strategy performing within what is expected from your backtesting and/or demo trading data?
2. Are you following your trading plan and trading in a peak mental state?
3. Is there unusual market behavior and/or news?

An unusually high number of losses, due to one or more of these factors, could lead to revenge trading. 

So review these 3 areas every week.

When you do, you won't be caught off guard by a high number of losses and be tempted to keep trading when you should really stop.

4. Implement the 2-Strikes Rule

I have a simple rule called the 2-Strikes Rule that guarantees that I will never blow out my account due to revenge trading.

I don't allow myself to take more than 2 losing trades on the same trading idea.

This rule has kept me out of a lot of trouble and it can help you too.

When you set limits like this beforehand, you are much more likely to follow them, even when your emotions are running high.

You can use whatever number makes sense to you.

But I've found that more than 2 to 3 shots at a trading idea does not increase my probability of success.

In psychology, there is a fancy term called setting boundaries.

You set boundaries in your everyday life and that determines what you will and won't tolerate.

Set a maximum number of losses on each trading idea and you will stop yourself from chasing trades and going broke. 

5. Increase Your Heart Coherence

Heart coherence has been proven to help people regulate their emotional state and make better decisions.

A high HRV means that you are in a state of high coherence. In this state, you are more likely to follow your trading plan.

Luckily, this is easy to measure.

There are many devices that will help you do this.

I wouldn't recommend using one of these devices while you're trading because it can be distracting.

But consider using one of these devices before you start trading, to ensure that you're in a solid mental state before you begin.

I use the HeartMath InnerBalance device. It pairs with an app on my phone and gives me feedback on my heart coherence.

Five minutes is usually enough for me to get into a high state of coherence.

It's like a reset button that will help you clear any negative emotions that may have come up prior to your trading session.

6. Identify Your Cue and Reward

In his book The Power of Habit, Charles Duhigg cites several examples of how powerful habits are and why they are so difficult to change.

I would highly recommend reading this book if you want to understand the inner workings of habits, how they are formed and how they can be changed.

However, if you want to get the short version, then this infographic will help. It's a complete version of the image above.

Based on his research, this is the process that Duhigg recommends for changing a habit.

The bottom line is that our habits (even our bad ones) give us some sort of reward.

So if you can figure out what that reward is for your negative behavior (revenge trading), you can figure out how to get the same reward, but with positive behavior. 

7. Implement Behavior Conditioning

Studies have shown that kids respond better to positive reinforcement, but adults are generally more responsive to negative punishment.

Of course, the type of reinforcement that works the best will depend on the person and the situation.

So experiment with the 4 methods of conditioning:

• Positive reinforcement
• Positive punishment
• Negative reinforcement
• Negative punishment

Once you understand which ones work best for you, then use them every chance you can, to keep yourself from revenge trading.

In my experience, I've found that the negative methods often work well in the short term, but positive methods tend to work best in the long run.

But again, experiment with both and see what you respond to.

8. Use a Positive Market Metaphor

Get rid of market metaphors that don't serve you.

Multiple studies have shown that metaphors can significantly color the way we see a situation.

So don't personify the market as a bunch of Gordon Gekkos or crooked brokers.

If you see the market as a battleground or place where you could “die,” then that's not a healthy metaphor either.

See the market as a network of regular people who provide a tremendous opportunity to make a great living from anywhere in the world.

Seek out cool traders and brokers who care.

Think of trading as the coolest club in the world, or the Olympic Games of Finance.

The more you can see the market as a positive place, that will reduce the likelihood that you will lash out at an “evil” market.

9. Leverage the Law of Resonance

Everything in the universe is made up of energy.

We tend to resonate with the type of energy that is in our immediate environment.

Here's an excellent illustration of this concept:

So be very aware of your environment and the people you hang out with.

• Do these people get angry easily?
• Do you watch shows/movies with a lot of violence?
• Is your home disorganized and distracting?

These influences could be triggering your revenge trading.

Do your best to hang out with positive people.

Turn off the news and consider what you're watching on Netflix very carefully.

I stopped watching the news in 2003 and it's one of the best things I've ever done for myself.

After some reflection, I also realized that Netflix is a waste of time and cancelled my subscription.

Carry a $100 bill to help yourself feel more abundant.

Keep your trading desk clean and organized.

These are all ways that you can start to raise the vibration of your surroundings and make you less likely to revenge trade.

Video Tutorial

If you prefer a video tutorial, here's a summary of the most important concepts mentioned above.

Frequently Asked Questions

Now let's wrap up this article with answers to a few frequently asked questions related to revenge trading.

1. How Do You Remove Emotions From Trading?

This is a common question that new traders ask when learning about revenge trading. But the answer isn't what they expect.

Traders cannot completely remove emotions from trading because they are humans, not robots. Therefore, the goal of every trader should be to minimize the negative impact that emotions have on their trading. 

The best way to do this is to demo trade and/or backtest your trading strategy extensively. 

When you've practiced your trading strategy over a significant number of trades, you will know your probability of winning.

Once you know this, you won't freak when you have a few losing trades in a row.

On the flip side, you also won't get too excited when you're winning either.

This will limit your emotional swings and make it much less likely that you'll revenge trade.

2. How Do You Avoid FOMO Trading?

The fear of missing out stems from the belief that there won't be any more trading opportunities in a market.

So a trader has to take THIS opportunity, before it gets away.

Of course, this is ridiculous because there are opportunities to make money every day.

The only thing that is preventing traders from taking advantage of these opportunities is a lack of skill in identifying them.

Therefore, the solution to FOMO trading is to learn different trading strategies across multiple markets. 

When you do this, you'll get to a point where you'll have too many opportunities and you'll have to be selective. 

3. How Do You Deal With Greed in Trading?

Greed is caused by the unrealistic expectation of a future result.

In trading, that means you think you're going to make way more than is realistic on a trade.

So again, the solution is backtesting and/or demo trading.

When you understand the parameters of your trading strategy, you'll know when to take your profits.

If you don't have that data, it can be very easy to hang on to a trade for way to long and see your profits disappear.

When that happens, it can be easy to try to make up for that loss by entering more trades.

Final Thoughts on Revenge Trading

If you find yourself giving back all of your profits, or you don't understand why you lost so much money last month, then be aware of your triggers.

Keep a trading journal to figure out where you lost emotional control.

I consider revenge trading the most dangerous psychological state in trading because it can end in a zero account balance very quickly.

If you are prone to this behavior, first acknowledge that you have an issue.

Then take action to fix it.

You got this.

The post What is Revenge Trading? Definition, Causes and Solutions appeared first on Trading Heroes.

It's well known that over 90% of traders fail at trading.

But why?

In my experience with learning to trade, working at a hedge fund and consulting with traders since 2007, the primary reasons that traders fail are a lack of a proven trading strategy, weak psychology and no accountability. 

But there isn't just one reason that an individual isn't finding success, it's always a combination of reasons.

Here's a complete list and breakdown of all of the reasons that a large majority of people who start in trading never achieve their goals.

Lack of Education and Knowledge

Trading without a solid understanding of trading strategies, risk management, trading platforms and psychology often leads to failure.

The weird thing about trading is that it seems easy, so people don't take it seriously. 

A common misconception among aspiring traders is that they can learn a trading strategy in a weekend and they will become successful.

They also think that they can just watch a YouTube video or buy one course and that's all they need.

The questions I get on my YouTube channel surprise me sometimes.

Some traders don't take the time to do some basic research on how trading works and they jump straight into live trading.

In reality, trading is one of the toughest professions in the world. 

So traders need to study as much as possible and find out what really works before risking real money.

This means reading trading books, watching many YouTube videos and taking trading courses.

Not Backtesting a Trading Strategy

Education and knowledge are not enough.

I've met many traders who know a lot about trading.

But it's a purely academic knowledge. 

They never take the time to backtest their trading strategies, so they jump from system to system because they don't understand the metrics of each strategy.

More importantly, many of them don't even know if the strategy actually has an edge or not!

That's like buying a home and not getting a home inspection.

A home inspector will usually know much more about what could go wrong with a home than the average homebuyer, who maybe buys 3 homes in their lifetime.

Isn't it a good idea to know what's wrong with the largest purchase you'll make in your life?

Of course.

Same thing goes for a trading strategy.

If a trader is going to risk their money and wants to make a consistent income from trading, it's vital that they know that the trading strategy actually works. 

Backtesting a strategy also gives a trader the confidence to take real money trades.

Once a trader knows that their strategy has an edge, what their max drawdown is, and they have a set trading plan, they have a support system to rely on.

The final benefit of backtesting is practice.

After seeing many historical trades, a trader has experienced many variations of their entries and exits and will get better at spotting opportunities.

Like with any other skill, practice makes (almost) perfect.

Poor Trading Psychology

As I mentioned in the beginning, lot of aspiring traders believe that all they need is a profitable trading strategy to succeed in trading.

Nothing could be further from the truth.

In my experience, trading psychology is the most important factor in becoming a successful trader. 

When a trader has the right mindset, they are able to overcome setbacks, find the best trading strategies for them and adapt to changing market conditions.

Without the right mindset, a trader will fall back on their default programming, which is almost always not well-suited for trading.

Humans are not built to be traders.

Our innate programming makes us fearful and greedy at exactly the wrong times.

If a trader is willing to work on his or her mindset, that will pay the biggest dividends in performance improvements.

I've written many articles on trading psychology, but I've personally realized the greatest gains by going beyond traditional methods.

The best tool in a trader's toolbox for improving their mindset is a trading journal.

They need to record their thoughts and emotions so they can reflect on them later and figure out ways to improve.

My favorite trading psychology book is Trading in the Zone, but these books have helped me a lot too.

Poor Risk Management

The next most important thing in trading is risk management. 

Failure to manage risk effectively can result in significant losses.

Traders who over-leverage their positions or move their stop loss orders often suffer large drawdowns that can wipe out their entire account.

Solid risk management can take a trading strategy from decent to super profitable, just by tweaking a few settings.

Many traders overlook this part of their strategy and trade a strategy as they learned it, or they try to make it more profitable by increasing the risk.

Those can be recipes for disaster.

Focusing on risk management can lead to some of the biggest gains in performance, so it should be studied carefully. 

Emotional Decision Making

Emotional responses such as fear, greed, and overconfidence can cloud judgment and lead to impulsive trading decisions.

Traders can never completely eliminate emotions, so they need to learn to mitigate negative ones and work with positive ones to find success.

Meditating before a trading session can help a trader calm down and get into the right mindset to trade.

But learning to manage one's emotions goes beyond just what they do before they trade.

If I had to summarize what it takes to control our emotions, it all comes down to detachment. 

Many times, people become too attached to an outcome and that's what makes them emotional.

People can get too attached to outcomes that really have nothing to do with them, like who wins the World Cup or who wins some game show.

This often stems from not having their own identity and overcompensating by identifying with an external event or organization.

When traders can detach from the outcome of a trade, and their identity as a “Trader,” then they are less likely to become emotional and make bad decisions. 

Lack of Discipline

Consistency is crucial to trading success.

Not necessarily consistent profits, but consistent actions.

The right consistent actions are what lead to consistent profits. 

Traders who deviate from their trading strategies, abandon their trading plans, or fail to adhere to their risk management rules are very likely to experience failure.

Some traders have discipline naturally or by training.

Traders who do not have it have to practice it to attain the skill.

There's no shortcut or hack here, it's something that has to be worked on daily.

Failure to Adapt

The world is dynamic and constantly changing.

Traders who fail to adapt to new market conditions, evolving strategies, or technological advancements may struggle to remain profitable.

We all have that family member who tells the same story over and over.

They are stuck in a time loop, often reliving their glory days.

You'll notice that they are usually also very set in their ways and cannot adapt to new situations and ways of thinking.

That's the kiss of death for traders.

For example, imagine if some traders were still drawing charts by hand.

They would be wasting time by not using computers to speed up their analysis process.

On top of that, everyone who is using computers is coming up with strategies that could potentially make hand-drawer's strategies obsolete.

So while it's not helpful to keep jumping to the next new thing, it's essential to keep up with new advancements and changing market conditions. 

Overtrading

Trading excessively, either by taking too many positions or trading with too large a position size, can increase transaction costs and destroy profits.

There's a misconception among aspiring traders that more trades will equal more profits.

In reality, it's usually the opposite.

A few well selected trades will always yield better results than a ton of mediocre or poorly chosen trades. 

Other reasons for overtrading are:

• Overconfidence: Some traders may overestimate their abilities or underestimate market risks, leading them to believe that they can quickly recover losses through aggressive trading.
• FOMO (Fear of Missing Out): Fear of missing out on potential profit opportunities can cause traders to enter positions hastily without proper analysis or consideration of risk.
• Trading too many markets: If a trader tracks too many markets, they can get “shiny object syndrome” and take every single signal in every market they track. It's important to practice discretion here and be very selective so they don't have too much open risk and too many correlated trades.

An interesting study also found that men tend to overtrade more than women, and single men overtrade more than married men.

Revenge Trading

There's a tendency for traders to treat the market like another person. 

Of course, that's ridiculous because the market is collection of many people from around the world.

But that's just what humans do.

And that's why traders fail.

So if a trader sees the market as a person, they can easily feel like that person has wronged them by causing them to lose money.

When that happens, some traders will want to get back at that “person” for their losses and they will take irrational trades.

Traders who are prone to thoughts of revenge have to guard against this bias by resolving their need to get revenge.

Understanding why they need to get revenge all the time is the first step to preventing this behavior. 

Lottery Bias

Many traders treat trading like gambling.

They think that they will hit one big trade and that will solve all of their problems. 

A common justification that I've heard for this is that a big win will erase all of their losses and finally allow them to trade “properly.”

What these traders fail to realize is that big wins require big risks and it only takes a few big risks to lose an entire account.

Another way that traders give into the lottery bias is by setting their stop losses too tight.

They think that they can set a tiny stop loss and make a big gain.

Sure, there are some traders who can successfully use a small stop loss.

But those are day traders or scalpers and most people are not compatible with a short-term trading method.

So traders have to evaluate if they are playing the lottery, or if they truly understand the market and are placing their trades accordingly.

Lack of Patience

Successful trading requires patience to wait for high-probability trading setups and backtested exits.

Impatient traders may enter trades prematurely or exit them too soon, missing out on potential profits.

Even if a trader has thoroughly backtested a strategy, there is always the temptation to take profits early.

The solution here is for a trader to go back to their backtesting results.

They should redo the test, but take profits early or enter trades that are not part of their trading plan.

When the results are compared, the course of action is usually very clear.

Wait for the best setups and see the trade through to the profit target.

Deviating from the plan will only cost the trader money.

Failure to Accept Losses

Losing trades are inevitable in trading.

There's no such thing as a no loss trading strategy.

Traders who refuse to accept losses and hold onto losing positions in the hope that they will turn profitable often incur larger losses.

Successful trading is all about:

• Having small losses and bigger winners
• Having small losses and small gains, but a high win rate

But not accepting a loss will usually lead to losses that are bigger than winners and make it impossible to make a net profit over time.

Inadequate Capitalization

Trading with insufficient capital can limit trading opportunities and increase the risk of margin calls or account blowouts.

Traders need to have adequate capitalization to withstand market fluctuations and cover losses.

Luckily, it has become much easier to get started in trading with a small amount of money.

In Forex, traders can get started with as little as $500 by trading nano lots.

But in other markets like futures, traders need a minimum of $25,000 to even get started.

So traders must understand the capitalization requirements of the markets they are trading if they want to have any chance of success.

On top of that, a trader cannot expect to make a full-time living with the minimum capital requirements.

For example, in Forex there's no way that a trader can make a living with a $500 account.

Same goes with a $25,000 futures account.

They have to practice good risk management and have a solid trading plan to build a small account to point that it will produce a significant income.

Lack of Understanding of Market Dynamics

Much like individual people, each market has its own personality.

There are different market dynamics, transaction structures and trader psychology that make each market unique. 

So a trader cannot expect to use the same strategies successfully in one market and have those strategies work equally well in another market.

Traders must take the time to learn the nuances of each market and what works best in that market.

Lack of Accountability

Traders who fail to take responsibility for their trading decisions will not learn from their mistakes and improve their performance.

In all fairness, it's easier to be accountable to others than yourself.

Based on personal experience, I understand this very well.

Therefore, I've also found that it helps to have an accountability buddy or group that can give me an external perspective on my trading behavior.

An honest reflection of what I'm doing has helped me realize things that I didn't see or was avoiding.

Beyond that however, traders have to take radical responsibility for all of their results.

That means no more blaming the market, the broker or the computer for losses.

Even if a situation seems to be out of a trader's control, that trader is still responsible for having a backup plan or accounting for the unexpected.

Final Thoughts on Why Traders Fail

So those are all of the reasons why most traders fail at trading.

Each trader will face his or her own combination of the challenges above.

But proper awareness, time for reflection and a good trading journal will help any trader make the necessary improvements.

The post Why Traders Fail appeared first on Trading Heroes.

Trading is a tough game.

Really tough.

Without the proper tools, it can be almost impossible to succeed as a trader. But with so many forums, ebooks and trading products out there, where do you start?

It can be really confusing and you might feel like you are going through the spin cycle of a washing machine.

I've certainly been there.

But not to worry. In this post, I'll show you the three things that you need to equip yourself with to help keep you grounded, and on track.

…and no, it's not a magic indicator.

These general concepts will help you long after you have given up on that last trading robot or holy grail. I will also give you specific solutions that I have used and recommend.

1. Trading Community

“No man is an island.”
– John Donne

If you have ever been on any of the public trading forums out there, then you have probably lost some faith in humanity.

Yeah, it can get ugly.

The forum posts usually start off with the right intentions, but then things quickly degrade to name calling and third grade potty-mouth.

So then why would I tell you that you need a trading community?

Well, you need to choose the right community. A friendly and supportive community can make all the difference and see you through the tough times and help you develop.

As you might know by now, people in your everyday life might not support your trading dream. In fact, many will be downright against it.

Therefore a great trading community or even just one or two traders that you can consult with, can make all the difference.

If you haven't read Napoleon Hill's classic book Think and Grow Rich yet, you need to do it this week. In the book, he talks about a mastermind group.

This is a group of people who have a common goal and their participation in the group creates a synergy that makes all of the members better than would be on their own.

So if at all possible, find a solid group of traders that you get along with and keep in contact with them regularly.

Recommended Resources

I would highly recommend joining Walter Peter's Naked Forex Community. It is the most supportive community that I have seen so far.

With most groups, the instructor leads the group and everyone else follows…and that is great.

But what makes Walter's community different is that he also seeks out trading methods that members of the community are trading successfully and gets members to share it. Everyone helps out where they can.

A totally different type of community and more of a true mastermind group.

You can also follow my Forex Traders list on Twitter. It can be another great way to start talking to successful traders.

2. Mindset

Next, you are going to have to upgrade your mindset to become a successful trader. You have probably heard this many times, but what does this actually mean?

Well, I'm going to break down the three areas of mindset that you need to start focusing on right now, in order to give yourself the best shot at success.

Mental Toughness

Let's get real, sometimes trading is going to suck. You are going to have a losing streak, you are going to be frustrated and you might want to give up at some point.

But the only way out is through. 

If you start breaking down and not following your rules, then you are setting yourself up for revenge trading and a huge loss.

So find ways to develop your mental toughness. You can train for something outside of trading, like a sport or some sort of certification. You could also pretend that you are down 10% in a month and try to come back from it in a demo account.

Here are some other suggestions…

Recommended Resources

Chris Capre's Advanced Traders Mindset Course is great for this. I would highly recommend it. This course teaches you how to quiet your mind and develop the mindset that you need to succeed.

I would also suggest that you learn a new skill that you have always wanted to learn. I've taken up archery.

A photo posted by Hugh Kimura ?? (@tradingheroes) on Aug 1, 2015 at 6:03pm PDT

When you are a beginner again, it can be a lot of fun. It can also teach you how to push through the frustration and improve.

An Abundance Mindset

This can be a tough one to overcome, especially if it has been drilled into you for your entire life.

Have your parents or friends ever told you that money doesn't grow on trees, or that you need to work hard for your money?

Yeah me too.

Well, it wasn't their fault.

That is the reality that they know and it has helped them get this far.

So when you start making some money by just clicking your mouse a few times, then your conditioning is going to start kicking in and you are probably going to sabotage yourself and find a way to give that money back.

It sounds weird if you have never experienced it, but if you have, then you know how it can creep up on you without any warning. The cause is very subconscious but the results are real.

But that doesn't have to be your reality.

Do something every day that will increase your awareness of the abundance around you.

For example, here's something that I noticed the other day. People here in the US  have easy access to tap water.

Not all of that tap water is completely drinkable, but we have access to it.

A lot of people complain about the poor quality of the drinking water in their area. That's a scarcity mentality.

But what are bottled water companies doing?

They have taken that exact same water, cleaned it up and they sell it back to us for a profit. These companies make millions a year from something that is freely available to the rest of us.

Opportunity is all around you…if you are open to recognizing it.

Recommended Resource

If you have the opportunity to go to a Millionaire Mind event, I would highly recommend it. The events are free, but they try to sell you upgrades during the event.

You don't have to buy anything, if you don't want to. In fact, I would suggest that you don't. They can be quite expensive and since I have not taken any of them, I can't tell you if they are worth it or not.

However, I can tell you that the free seminar is totally worth it and it can change a lot of ideas that you have about money. It can seem a little over the top in the beginning, but they are only doing that to break your mental patterns and set the stage for change.

If that is a little too much for you or you don't have access to an event like that, then you can start small. One exercise that has helped me is the Infinite Bank.

You can read more about it here, but essentially, you carry a $100 around in your wallet at all times, but never spend it. That's not a lot to most people, but it is enough to buy most things that you see at the store.

Then throughout your day, you imagine all the things you can buy with that $100.

By the end of the day, you may have spent over $1,000…at least in your mind. You will notice that this can increase your feeling of abundance.

…and you will never be caught without cash at a cash bar

Just remember to replace it, if you do end up using it. 

Foregiveness

This is something that I feel is one of the biggest negative feelings that you need to overcome, if you want to become a great trader. It is easy to beat ourselves to a pulp when we have a losing trade or we don't fill out our trading journal.

…or any of the dozens of things that we do as traders.

But that is only going to make things worse.

Remember though, it's not your fault. As humans, we are programmed to look for what can go wrong and be prepared for it.

Therefore, we naturally look for what is wrong in a situation. We also seem to be particularly hard on ourselves.

This can be useful when we are trying to learn something, because we strive to get better. But more often than not, we take it too far and are too hard on ourselves, which leads to a downward spiral.

When we are able to forgive ourselves and see the situation more objectively, we can benefit from even a bad situation. We can learn what we did right, what we did wrong, and we will hopefully learn how to avoid that situation in the future.

Recommended Resources

Close your eyes for a second and take a couple of deep breaths. OK now imagine that you are in the movie Big. Or if you prefer something with more action, something like Face/Off.

Whatever the case, imagine exchanging bodies with your best friend. You are in their body and they are in yours.

Now imagine that you have just had a losing trade.

But just as you are about to beat yourself up again, you look in the mirror and see your friend's face looking back at you. You are in their body, after all.

When you see their face, could you say the same things to that face that you would say to yourself? Would you call your friend stupid or berate them for always getting things wrong?

Of course not. You would encourage them to suck it up and move on.

At least I hope so.

So treat yourself like you would treat your best friend. With love, understanding and encouragement.

I would also recommend reading Radical Acceptance by Tara Brach. It can help you smooth out a lot of those rough corners in your life and help you see yourself in a different light.

3. Education

Finally, you need to get educated. But you probably know that already.

However, many aspiring traders try to get by with free education on the internet because they are too cheap to pay for it. While you might be able to get the right education for free, you will save a lot of time by paying for an education from a reputable educator.

The problem with free education is well…it's free. So you have to sort through a ton of crap information, in order to get to something that works for you.

There are going to be opinions from everyone who can bang on a keyboard and thinks that they are a trading expert.

When you seek out reputable traders, you will have a method that has been proven to work. Then you have to tailor it to work with your personality.

Recommended Resources

Here are some of the paid resources that I recommend. There aren't too many of them. But that's the point

But don't limit yourself to that list. There is a lot of great trading education out there.

Discover what works for you!

Conclusion

Having the right community, mindset and education are the keys to becoming a successful trader. Many people focus on one or two of these things, but without the third, you will have a really tough time.

It's not always easy to find things that work for you, but keep searching, because they are out there!

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The post 3 Things You Must Have for Forex Success appeared first on Trading Heroes.

Anyone who has ever traded, at one point or another, has experienced the “thrill of trading.” You know, the rush that comes with not knowing what will happen next.

Will you double the account, or will you blow it out? Are you going to be able to buy that new Rolex with your winnings?

This can be a lot of fun…for a little while.

Until you realize that you are not really trading, you are gambling.

Then reality sets in. You might actually have to become a real trader…and your trading might have to get less exciting. 

This post will show you the trading psychology you need to make your trading…

Real (Successful) Trading Should be Boring

I recently talked to Walter Peters about this. Successful trading means only trading when there are opportunities and knowing what to expect on each trade. 

Of course, you will never know the exact outcome, but you need to have a plan for all of the scenarios that could unfold. That is when you will probably start to make money.

It's not very sexy or exciting. But do you know what is sexy?

Making consistent income from trading. If that is your ultimate goal, read on…

How to Make Forex Trading Boring

Here are the 5 ways that I have seen successful traders make trading much less exciting and a whole lot more profitable.

1. Discover Your True Personality

This one can take time and a lot of effort. We would think that since we have to live with ourselves every day, that we would know ourselves better.

But unfortunately, we can also get used to ourselves and become oblivious to what we are doing.

One of the best books I have read to figure out what is going on between your ears is called Trading, Sex and Dying. The book was originally called: Poker, Sex and Dying.

The odd title comes from the author's life experiences as a professional poker player, a dating service operator and working in a mortuary.

These seemingly unrelated careers do have something in common. They exposed him to the extremes of the human emotion.

When people are under stress, their true self comes out. From this, he was able to put people into a few basic categories.

Reading about these personalities can help you understand what is going on inside your head. Once you understand that, it can help you choose a trading system, figure out which time frame is ideal for you and decide if you need incremental automation.

…and that is half the battle.

2. Get Educated

Some people take this as: collect as much free stuff from the internet as possible. Sure, you can get some great education, by doing this.

But you also have to sort through a ton of crap, to get to the good stuff. 

From my experience, I would recommend paying for your trading education. This does more than you might think.

1. You are much more likely to use something that you paid for than something you got free. We are funny like that. Think about how you value things you got free, compared to things you paid for…even just a few dollars.
2. Paying for a course allows you to eliminate the junk from questionable sources. You get down to business right away.
3. When you do some research on a trading educator, you can get a good idea of if their trading style will fit with your personality.

3. Practice a Strategy and Understand it Really Well

Yes, you need to practice your trading strategy. This means backtesting and forward testing.

In backtesting, you test your strategy on historical data. As you know, past performance does not guarantee future results.

But it can give you a great idea if your trading system has a good chance of working.

If your backtesting works out, then forward testing allows you to see if the strategy will actually work in live market conditions.

These two testing methods aren't fun sometimes. But they are essential to your success.

4.  Focus on Your Trading Psychology

Finally you have to focus…

Focus when you are trading, focus when you are testing and focus when you are journaling your trades. 

It sounds simple, but it's not easy. There are so many distractions.

Doing things like meditation and setting aside time for your trading can help you improve your focus.

5. Review Your Trading

This is one that I have struggled with and many other traders do to. But reviewing your trading is the only way to get better.

After all, how can you improve, if you don't know what you are doing wrong?

The best way to learn to improve your trading is to keep a trading journal.

Here are a few options that you might want to try out.

• How To Journal Your Forex Trades With Evernote
• How To Individually Track Multiple Trading Systems In The Same Account
• How To Video Journal Your Forex Trades
• A video tour of MyFxBook

Some of these solutions will record most of the details of each trade, so you have no excuse for not filling in the blanks. Give them a try and see what works for you. 

Conclusion

So that's how you can make trading boring. If you are looking for excitement in your trading, then you are still probably too new to the trading game.

Come back when you understand that Forex trading should be boring. 

If you understand that making money consistently and excitement usually do not go together, I hope that the strategies above will help you become consistently profitable.

Did I miss anything? Let me know what you think in the comments below… 

The post 5 Ways to Make Forex Trading Boring – The Trading Psychology of Success appeared first on Trading Heroes.

The worst thing that you can do as a trader is to go on tilt.

• You start chasing trades instead of letting them come to you
• You erase your hard-fought gains
• You rationalize bad trades
• You cry yourself to sleep at night

Sound familiar?

But why do we start going on tilt? Most of us know better.

Yet we insist on being stubborn and giving into our animal instincts, instead of relying on our trading training.

When we finally come to our senses, it can be too late and the damage has already been done.

Worse than the monetary damage is the hit we take to our psychological capital.

That can leave us scarred for weeks or months to come.

But how do we prevent this?

There isn’t one blanket answer, but I believe that the best thing we can do is to learn from the experience of others.

That is why books like Market Wizards and the Jesse Livermore biography are so valuable.

They give us a glimpse into what other traders should have done, but didn’t.

So in order to help you learn from my experience, I’m going to explain how I went on tilt late last year.

I’ll get into the details of why I did it, how it affected me and how I stopped it.

The Cause

In this case, I got bored.

Actually, that's not really it.  If I think about it a little deeper, I was over anxious for results.

My account had not moved past +12% in a long time and I was getting married. There was pressure to perform as well as I knew I could. I wanted to finally make some real gains in my account so I could start trading for a living.

The pressure wasn't from an outside source, it was completely within.  I'm sure you have felt that before.

It wasn't the system's fault, it was obviously net profitable or breakeven at worst.

But I was trying to make the system do something that it obviously wasn't built for.

A horse can only pull a wagon so far before it has to rest.

Production cars currently max out at about 270 mph.

Everything has its limits.

Push a system beyond its limits and it starts to break down. This is exactly what happened to me.

The Result

When I first started tracking my live account in MyFxBook in 2011, I had some outstanding initial success.

My first few trades made 12%, with only one small losing trade.

Then I proceeded to trade between 9% and 12% for quite awhile.

That was frustrating.

But it wasn't surprising.  From my backtesting, I knew that there were periods where the system traded flat for some time.

It was profitable overall, but I new what to expect.

Yet, I still insisted on forcing things.

This lead to me going from a little over 12% profit at my high point to almost back to 0%.

The green bars on the graph represent pips made and lost.

You can tell that I was trading poorly because the big losses in pips corresponded to a sharp drop in my profit percentage.

On the other hand, when you look back at June 2013, I lost 1,095 pips.

This can be seen by the huge green downside bar on the chart above.

But the corresponding loss on the growth graph (red line) was very small.

So let's take a look at what I learned from all of this…

The Lesson

I should have kept the current system in place and looked for another system to supplement it.

Or I could have stopped trading it altogether and took some time to find a new trading method.

But I ended up doing the absolute worst possible thing, pushing my system beyond its limits.

In hindsight, I should have stopped trading the system.

If it wasn't showing consistent gains every month, then it wasn't a good candidate for trading for a living.

That is all there is to it. Imagine what the graph above would look like if I had kept the current system in place and just added the second system.

Conclusion

So if you are not getting the results you are looking for, take a step back for a moment.

Ask yourself if you can do one of the following:

• Can you keep your current system in place and just add another one?
• Do you need to stop trading your current system?
• Do the results of your current system match your backtesting results?  Did you even backtest?

Hopefully answering these questions will keep you from making the same mistake I did.

The post The Anatomy of Going on Tilt in Trading appeared first on Trading Heroes.