How to strengthen your forex mentality (What to do when you lose)
Koki Ando
Success in forex trading depends not only on technical and fundamental analysis, but also on strengthening the mental side of the game. Emotional ups and downs and the stress of losing can be a trader’s greatest enemy, but fortunately, there are ways to overcome them. This article will discuss “How to Strengthen Your Forex Mentality” in detail.
First, it is important to accept the reality that winning and losing are inevitable in forex trading. However, how you deal with losing and strengthen your mentality can increase your chances of success in your next trade. In this article, we will start with the causes of forex mental breakdowns and then introduce specific ways to strengthen your mentality and how to recover mentally when you lose.
After reading this article, you will know how to control your emotions and strengthen your mentality in forex trading, making it easier to maintain a sense of normalcy. As a result, you can reduce your risk of loss and maximize your profits. Strengthen your mentality and increase your chances of success in forex trading.
Causes of FX Mental Collapse
Forex trading is an exciting and fascinating world of profit-seeking, but it is also a difficult challenge to maintain mental stability. This is because mental breakdowns in trading tend to be painful moments of facing reality for many traders. In this section, we will focus on the underlying causes of forex mental breakdowns and explore in detail how they affect traders.
Understanding the causes is an important step in strengthening your mental health because knowing the causes will help you deal with them. let’s take a closer look at each of the major causes of forex mental breakdowns.
Loss
Losses are an inevitable path in forex trading, but a series of losses or large losses can cause a great deal of emotional turmoil and mental breakdown for us. Continued losses can increase impatience and anxiety, which can interfere with calm decision making. If we do not follow our trading rules or repeat trades impulsively, our losses can compound further.
The key is to thoroughly analyze the causes of losses and learn from mistakes.
By keeping a record of trades, pursuing the causes of losses, and recording changes in emotions while holding a position, one can identify one’s own weaknesses and obtain clues to improve them.
Even if a profit is made, looking back on the process and asking yourself what went well or what went wrong can lay the foundation for better trading in the future.
Furthermore, thorough risk management will minimize the impact of any losses. To balance risk rewards, you can reduce mental pressure by setting a multiple of expected profit for losses (e.g., 2 profit margins for every 1 stop) and trading with ample funds.
Inexperience
In the world of FX trading, inexperienced traders may feel a strong reluctance to cut losses on positions they hold when faced with large unrealized losses. They tend to be slow to react to changes in market trends and fundamentals, and often miss important signals.
As one becomes more experienced in trading, one can think of losses as a necessary expense, and one can mechanically cut losses quickly on unprofitable positions, which does not affect one’s mentality as much as it does for beginners.
In addition, being surrounded by many technical indicators makes it difficult to determine which information to focus on. Therefore, a simple approach is recommended in chart analysis, and trading with one to three technical indicators is effective.
For example, the chart below shows only the Ichimoku Kinko Chart and RSI, but these two alone can tell us a variety of market conditions. Rather than blindly using technical indicators, it is recommended to understand the characteristics and features of a single technical indicator and learn to use it.
ThreeTrader provides an analysis report every morning using the most appropriate technical indicators for the market. Please take a look at it for reference.
It is important to look back on past trades to find the trading style that works best for you. A demo account is a good tool to learn how to operate, but we recommend that you start trading on a smaller scale with real money once you are comfortable with it, as emotions play a large role when trading with real money.
Inadequate Strategy
A well-thought-out trading plan and a solid strategy are essential to success in forex trading. Poor market analysis or lack of preparation increases the risk of making the wrong trading decisions. Successful traders have clear rules for their trading and strictly adhere to them to protect themselves from emotional trading. They must also be flexible enough to regularly review their strategies and adapt them based on new market information, as the market is constantly changing.
When building your strategy, consider the following steps.
1：Understand the underlying fundamentals.
2：Check to see if a trend is currently occurring.
3：Select appropriate technical indicators and trading tools.
4：Find optimal entry and exit points.
5：Always set a stop point to manage risk.
By taking these steps, we can build a solid strategy that can respond to unexpected movements in the market.
Excess Trade
In forex trading, excessive trading is a major cause of mental strain.
The market is always moving, creating the illusion of constant opportunity, but hours of continuous trading eventually leads to fatigue and poor performance.
To retain your judgment, you should emphasize quality over quantity of trades by limiting the number of trades per day. With a good trading plan, you can trade calmly and dispassionately.
Also, a loss in a trade is not necessarily a failure. The question is how the loss occurred. If the loss is within your self-imposed rules, it is unacceptable, but valuable as an opportunity to learn and grow. From such losses, lessons can be learned to avoid the same mistakes in the future. However, losses incurred by ignoring the rules are an important sign to reevaluate one’s trading strategy.
After a series of trades, it is essential to pause trading and work on mental recovery, especially if losses are incurred. At this time, you can objectively reflect on your emotions and behavior patterns and find areas for improvement for the next trade.
Taking a moment to look at yourself objectively is critical to your long-term trading success. By taking a break before losing your cool, you will be in a stronger frame of mind the next time you face the same situation.
Excessive leverage
The use of excessive leverage is a practice that significantly increases risk in forex trading. While leverage, which allows one to execute large trades with little capital, has the potential to generate large profits, it can also increase losses by the same proportion if the market moves in an unexpected direction. Therefore, when applying leverage, one must understand its mechanisms and risks and properly manage one’s capital.
In actual trading, leverage should not be used to its fullest extent, but should be kept within operational limits.
For example, when using platforms such as MT4, it is recommended that account maintenance rates be checked regularly to maintain a safety margin as a way to properly manage risk. In particular, account maintenance rates below 300% should be avoided as much as possible, as this increases the risk of margin calls and forced closures. When adopting a long-term trading strategy, an account maintenance rate of 800% or higher should be targeted to maintain a safe trading environment against sudden market fluctuations.
Thus, a prudent and strategic approach in using leverage at all times will ensure sustainability and stability in trading.
How to strengthen your forex mentality
Success in forex trading requires not only exceptional technical skills, but also a strong mental attitude. In this section, we will focus on key ways to strengthen your Forex mentality (i.e., how to address the causes of mental breakdowns) and present specific approaches that will facilitate your growth as a trader.
The first step is to accept failures and losses as valuable data. Failures in trading are opportunities to learn and grow. Gaining experience will lead to mental stability and improved judgment. In addition, by developing a strategy, you will be able to trade calmly and without being influenced by your emotions.
In addition, it is important to take care of your physical condition. A healthy body supports a healthy mental health. Finally, trading with excess funds is a way to minimize risk while reducing the pressure on your mental health.
Let’s take a closer look at each of these.
Accept failures and losses as valuable data
Trading in the marketplace is often unpredictable, and sometimes losses occur despite the best laid plans. However, these losses can be viewed as important stepping stones to future success.
When you experience a trading failure, use it as an opportunity for personal growth and mental strengthening. By analyzing the causes of your losses in detail, you can determine which areas need to be improved upon to ensure success on your next trade.
It is also important to check each and every market fluctuation, your own emotions, and other influencing factors when a trade goes wrong. This will enable you to deal with the same situation more calmly and efficiently when you are faced with it again.
The habit of keeping a record of your trades helps you understand your strengths and weaknesses and develop the ability to make decisions based on logic rather than emotion. In order to consistently profit over the long term, it is essential to have the mental flexibility and strength to take advantage of these “lessons learned. Experiencing failure is a passing phase in the development of your mentality and your growth into a superior trader.
Gain experience
To hone your trading skills, trading experience in the real market is of utmost importance. Demo trading is also available, but it has the disadvantage of using virtual funds instead of one’s own funds, which makes it difficult to feel psychological pressure.
Trading with your own funds is different from a demo account in terms of fear, the difficulty of profit taking, and the tension of real-time moving market prices. At first, you may be nervous just to see the price of profit and loss move, and you may feel scared to see the fluctuation of profit and loss.
As you gain more experience in forex trading, you will strengthen your mentality and gradually come to understand the characteristics of currency pairs and your own trading tendencies.
The more time you spend as a first-time trader, the more you will develop the ability to adapt to many different situations. Markets fluctuate on a daily basis, and in order to adapt to them, you must continually improve your own trading methods, using lessons learned from experience.
You can also study the methods of other professional traders for tips on how to be successful.
Reflecting on your own trading records and analyzing the differences between successful and unsuccessful trades will help you develop your own trading style and lay the foundation for making smarter trading decisions in the future. Ultimately, market practice is the best way to deepen your trading knowledge and understand your own emotions and behaviors.
Develop a strategy
To be successful in trading, it is important to plan ahead and not be swayed by emotions. Calmly analyzing the market, managing risk, and planning to use your money wisely will ensure stable trading. It is important to follow the latest market trends, set entry and exit points in advance, and trade according to rules.
By keeping an eye on market fluctuations and being flexible in adjusting your plans, you will be able to respond quickly to unforeseen circumstances. By taking a long-term view and not being distracted by temporary market movements, you can improve the accuracy of your trades as well as your mental stability. This process requires that you regularly review your own trading plan and update your strategy as needed based on market trends, news, economic indicators, and other information.
By doing so, you will develop flexibility and responsiveness as a trader and aim for long-term profits. Developing and executing a trading plan is a solid step toward market success.
Take care of your physical condition
Trading is a demanding job, both physically and mentally, so maintaining good physical condition can affect profit and loss. Trading for long periods of time, often accompanied by great stress. Therefore, it is important to maintain good physical and mental health by incorporating moderate exercise into your daily routine, ensuring quality sleep, and eating a nutritionally balanced diet. Sleep is especially important, so rather than watching the market all the time, it is recommended to focus on trading at a specific time. Characteristics and Trading Methods (Cautions are also explained!) for more information about the three major FX markets.
These will form the basis for maintaining good judgment and effectively managing the stress of trading. In addition, setting aside time to relax regularly and engaging in hobbies, walks, or other diversions will also help relieve stress.
Since the success of a trade is directly affected by the state of one’s mind and body, daily habits lead to good physical condition, which in turn leads to a stronger mental attitude.
Trade with surplus funds
Money management is the key to successful trading, and the basis for this is the use of “excess funds.
Surplus funds are money set aside for investment, excluding day-to-day living expenses and emergency provisions. Using this money reduces stress by ensuring that losses from trades do not directly affect your life.
The money you use for trading should be kept within the risk range you feel comfortable with, and it is important that you do not become mentally overwhelmed by losses. In addition, keeping investment funds well separated from the money you normally spend will help with mental stability.
When trading using only surplus funds, it is recommended that traders not fail to calculate risk, set a clear range of acceptable losses, and systematically distribute funds within that range. In addition, it is important to be prepared for trading successes and failures, and making calm and rational decisions at all times is an important factor in building a long-term trading career.
Use your surplus funds wisely to minimize the mental pressure of trading and achieve consistent performance.
Mental Recovery Methods for Losing Forex
In forex trading, everyone loses from time to time. However, the ability to bounce back from those losses is the key to success. In this section, we will look at effective ways to recover mentally when you lose in forex and explore pathways to regain mental stability for your next trade.
Specifically, first, utilize healthy habits such as exercise, diet, and sleep to reset your mind. We also understand that nothing will change if we stay depressed, only time will pass. And most importantly, we accept defeat as valuable data, calmly pursue its causes, and develop remedial measures. As the saying goes, “Failure is the source of success,” and in every failure lies the seed for success.
Let’s take a closer look at each of these steps.
Reset your mind through exercise, diet, sleep, etc.
Experiencing losses in forex trading is tough for anyone, but exercise, nutrition, and adequate rest are effective ways to relieve the stress.
For example, exercise helps to relieve physical and mental tension and reduce stress, so jogging or walking is a good idea after a tense day of trading. This will lower the levels of hormones that make you feel anxious and depressed, and make you feel more cheerful.
A well-balanced diet also provides energy to the brain and helps maintain calm judgment. It is important to maintain a regular diet, as irregular eating habits can easily lead to mental imbalances and negatively affect trading performance.
In addition, a good night’s sleep is necessary to recover from the day’s fatigue and improve your focus on the market the next day. Especially after a loss, it is effective to adopt a relaxing meditation or yoga practice to calm the mind and prepare for the next trading session. These methods will not only aid in mental recovery, but will also contribute to your long-term success as a trader.
Understand that time only flies when you are depressed
When you fail in a trade, it is natural to feel depressed, but time does not stop. Therefore, instead of wasting time dwelling on a temporary failure, it is important to view that time as a time to explore new opportunities and prepare for the next trade.
After a loss, spend time pondering it and analyzing specifically what went wrong and how it can be improved. Then, use the lessons learned to develop a better trading plan, which will lead you to your next success. The ability to quickly overcome failures and move forward is essential to your growth as a trader, and using your time effectively to improve yourself will ultimately lead to greater success.
Instead of standing still, having time on your side and always being ready to take the next step is the key to survival in the world of forex trading.
Accept defeat as data, pursue causes, and formulate remedial measures
Losses in forex trading can cause disappointment, but you can turn this experience into a step toward future success. First, it is important to analyze the losing trade without emotion. Understand what market conditions and what decisions caused the loss and use this to plan your next trade. Often there are specific trends in market losses, and understanding this will help you prepare for similar situations when they arise.
For example, keep a record of your trades and describe in detail which trades did not work, why you made that investment decision, and how it can be improved. This will help you avoid repeating the same mistakes and develop better risk management and trading strategies.
The key to becoming a professional trader is to see losses not as just a negative outcome, but as a learning experience that will help you grow and use it to improve your trading skills.
Keep Mental and Trade Forex with Threetrader
Threetrader provides information on fundamental analysis and economic indicators that can be easily understood in each morning’s Daily Report to help you maintain your psychological health and make effective forex trades. Checking the day’s scheduled economic indicators before making a trade helps to mentally prepare you and reduce uncertainty.
In addition, the Weekly Report provides a schedule of economic indicators to be released over the next week and currency pairs to watch over the weekend, making it easier to create a trading plan for the week ahead. In particular, the Weekly Report predicts the movements of currency pairs and cross currency pairs that are likely to move significantly in the market, and helps investors clarify which points to pay attention to when considering their trading strategies for the following week.
These are distributed on the official ThreeTrader website and on X to help traders make informed and knowledgeable trades, which in turn contributes to mental stability. We encourage you to take advantage of these tools to help you keep your cool as a trader.
Click here to open a live account
Summary｜How to Strengthen Forex Mentality
In this article, we focused on strengthening the mentality in forex trading, and we also told you what causes mental breakdowns, how to make it stronger, and what to do when you lose. let’s review the key points again to prevent forex mental breakdowns and pave the way to success.
First, we explained the causes of forex mental breakdown. Losses, inexperience, poor strategies, excessive trading, and excessive leverage are factors that affect traders’ mentality.
Next, we showed you how to strengthen your forex mentality. Accept failure, gain experience, and develop a strategy. It is also important to take care of your physical condition and trade with extra funds.
We then explored mental recovery methods when losing in forex. We change our mindset through exercise, diet, sleep, etc., reflect on our trades, and look for areas for improvement. By doing so, we can recover our mentality and apply it to the next trade.
Combine the coping and recovery techniques we have shared with you to strengthen your forex trading mentality and take steps toward sustained success. strengthening your forex mentality will improve your trading confidence and stability and help you build long-term results. Along with the knowledge and mindset gained in this article, you will gain experience and develop a strategy.
