In forex trading, the aim is to be as objective as it is possible so that we spot the right opportunities at the right time. We have been told that in order to be effective traders, we must learn to apply emotional control in our trading. Emotions have long been regarded as the enemy of successful trading due to their power to influence our decisions and behavior.

Common sense then tells us that we should try and control our emotions or even better banish them completely from our trading repertoire. Our culture sees emotional control as an indication of inner strength and iron will. You cannot let your sadness or fear get the hang of you, because if you did, it would cost you dearly.

So you must stop panicking. The trend seems to have reversed and you are a breath away from your stop loss. Or even worse, you never set any stop loss and your balance is slowly waving goodbye. That’s the third consecutive loss you are taking. Do not fail to remember; there is no place for disappointment here.The world is a tough place and markets are relentless. The sooner you realize this, the better you‘ll be able to control your sadness over your losses. What would great traders do in your place? Would they panic like you? I don’t think so. Then, just get on with it.

Does this approach work for you? I bet it doesn’t. We try so hard not to panic because we know it’s not going to get us anywhere good but we still panic. We try not to get disappointed over a loss, but we do. We try to take the next trade with no fear but we can’t. We get conservative, we exit early, we don’t even attempt to take a trade we knew it was a good one.

Why is it so hard to control our emotions?

The reason is because there is no such thing as emotional control.

  • We cannot control our emotions.
  • We cannot control our thoughts.
  • We cannot control the market.

Control is an illusion. I know that as you are reading these lines, there is a part of you who wants to resist this idea and dismiss it as nonsensical. This is a perfectly normal reaction; I would like to ask you however, to invite this unconvinced part of you to sit by the side for a minute because there is a lot of evidence behind this claim.
Actually, the more we try to control or eradicate emotions and thoughts from our lives, the more aggressive they become. Not only they do not go away but they engulf us so tightly that we cannot escape.

Control of thoughts

Consider this example.
Please do not think about a delicious warm chocolate cake with icing and cream. You can think about anything else you‘d like apart from this chocolate cake, melting in your mouth.
Just try to keep not thinking about this sumptuous, dark, freshly baked chocolate cake for the next two minutes.

How did it go? The majority of people think about the cake numerous times during this exercise. Those who say that they do not think about it, usually push themselves to think about something else in order to “cover” the chocolate cake thought. But in order to achieve this, they first have to think about the cake.
So if you tell yourself “Don’t think about that silly loss you had the other day”, “Don’t think about all the times you got it wrong”, “you must stop having these self-defeating thoughts” ,you are just entrapping yourself in them deeper.

“Let’s suppose I have you hooked up to the world’s most sensitive polygraph machine. I want you to imagine that this machine is incredibly effective in measuring anxiety. The task is simple. All you have to do is stay relaxed. However, I know you want to do well, to try hard, so I am going to add an extra incentive here. I will have a loaded .44 Magnum trained at your skull. You must stay calm or I’m going to shoot you. I’ll kill you if you get anxious, which I’ll know you are based on this polygraph.”

The above metaphor is used in Acceptance & Commitment Therapy (ACT), to show the futility of emotional control.
When you try to control what cannot be controlled, you will probably end up feeling powerless and completely beaten by that very thing.

That’s crazy! We need to be able to control or get rid of unpleasant thoughts and emotions!

If not, then we must accept that the norm is living in a mental and emotional anarchy. We must admit that those emotions are stronger than us and we cannot do anything about it! What about free will?

There is a very important clarification that has to be made here. Indeed, we cannot control thoughts or emotions and “delete” them from our mental processes.

But we can decide what we do with them. In the previous section, “Understanding the mind”, we talked about the incessant chatter of the mind. We described the nature of our human mind and how its habits may be sabotaging us.

  • We cannot stop the chatter but we can choose how to respond to it
  • We can learn how to listen to the messages that our emotions trying to give us and utilise them for our best interest

and as far as control is concerned,

  • We can control our trading decisions/choices
  • We can control our actions

In other words, instead of trying to control our thoughts & emotions,

  • We can learn to be aware of them and recognise their presence when it occurs
  • Understand how they influence our decisions and trading behaviour
  • Become skilled at responding to them differently and in ways that make us more effective towards living our values and achieving our goals as traders.

The first step towards acquiring  this new set of skills is to understand and practice Mindfulness.