Have you heard the term “trader’s block?” How about “writer’s block, ” the condition where an author loses his inspiration and ability to produce new work? What about mental block?
It’s not just authors and writers who battle a “block.” It can crawl up on anybody in different ways. This piece explores and helps you get over a trader’s block. Many traders, including professionals, experience it occasionally, so it is an excellent opportunity to plan against it. We explore tips to manage and guide against trader’s block. So, let us get to it.
What is Forex Trader’s Block?
Like writers who experience writer’s block, traders get these blocks too. Forex trader’s block often occurs after a significant win or a significant loss and is triggered by various reasons. Sometimes, traders think they will never be able to replicate their last successful trade and good performance in the forex market. Other times, they fear potentially losing a massive amount of their capital when entering a trade.
So, how do you overcome trader’s block? How do you get back to smart investment decision-making in your forex trading? And how do you forget the losses in your previous trades and the horrible past performances and move on to trading profitably?
“Going on tilt”
If you have ever played poker, you know what tilt is. It is a bad state of mind that causes a player to make many mistakes. You’ll often hear this term in trading: “going on tilt.”
When the trader’s block crawls up on you, you’ll feel paralyzed, riddled with fear, and unable to act and find trades in the market. You’ll find yourself sitting there waiting for the perfect forex or stock trade that may never come. Just like an author gets into writer’s block and loses the ability to write and produce content, you’ll lose the ability to ignore the risk in trading. It becomes more difficult to find profitable trades when analyzing currency pairs, stocks, or any other financial instrument.
When this happens, remember that you’re not alone, and many other traders are going through the same thing, including some very successful and profitable traders. Do not automatically assume the worst. Instead, take some time to relax without bothering too much about it. It is part of the trading experience, and most investors will have to deal with and overcome this phenomenon at some point in their trading career.
How to Deal with Trader’s Block in Your Forex Trading
Before we dive into the best ways of dealing with the block, let’s quickly reflect on what NOT to do when you get into a trading block. Perhaps the most important thing to avoid while dealing with trader’s block is forcing yourself to take trades. This often backfires as you are no longer mentally in sync with your trades.
Don’t place trades randomly. You’d just be gambling and losing money. Instead, sit it out for a while. Your ability to align your mental state with your trades is essential to your success in forex trading. You cannot meaningfully trade any financial security with an unfocussed mind. It is highly counterproductive.
Now that we have addressed the DO NOTs, we can consider the solution to the trader’s block.
1. Take a Step Back and Relax
Take a breather. It might be just what you need. It’s the wrong time to trade the financial markets. So, switch the computer off and take some time for yourself. Do what you like to do whenever you’re feeling overwhelmed and forget your minor setback as a trader. Consider taking a relaxing bath, doing a puzzle, taking a trading course, visiting a website you like, playing video games, or just taking a nap. In an extreme case, and if required, consider taking a week off if you cannot regain your trading confidence within a shorter space. But do not go forever. The goal is to distract yourself from trading in the interim. So, do whatever works for you.
2. Start Over
Sometimes, the best thing to do is to reset and restart. Every trading day is a new opportunity to start afresh.
You may need to go in with a new trading strategy. Or tweak your old forex strategies a little to meet the demand from the markets. Maybe you need to sharpen your technical analysis skills and improve how you read the charts. Sometimes, a fresh start is the right way to go. Some traders often feel the need to increase their knowledge to build their confidence.
Take enough time to review your strategy entirely and wait for the right moment to return to your trading. Start afresh with a demo account and practice with virtual money if necessary. Try new ways and ideas to find trades in the market. Adjust your findings to account for your past experiences. Alongside helping you to regrow your confidence, it reminds you of valuable things you had forgotten.
3. Educate Yourself and Listen to Other Traders
Another crucial step to overcoming trader’s block is to read, learn, and listen to stories from other traders who faced the same situation. In other words, broaden your horizons. For example, many athletes with an injury that kept them out of the court for long periods often claim that the time off the court helped them visualize the game better. Consequently, they came back better than ever.
A trader going through a block can achieve the same. Use your time off the markets to learn about the supply and demand in forex, how forex brokers work, what affects the price of a stock or a currency pair, the psychology of trading, and the right time to buy and sell securities. You can also focus on a new technical analysis indicator or learn more about the most basic indicators like support and resistance levels, moving average, RSI, etc. There are also many podcasts by traders who share ideas and give insights into the market. Learn from them.
While keeping your trading routine going may seem like the least important thing, it will impact your trading perception and help you overcome your trading block.
4. Slowly Dip Your Feet in the Water
Now that you’ve cleared your mind and returned to the basics, it’s time to look at the trading charts again and follow the price action in the forex market. Spend quality time analyzing the market or a certain currency pair and remember the necessary steps in your trading plan and strategy.
Once you’re confident of a trading opportunity, take it. You have to consciously place that trade and make a profit. Even if it’s a little profit, you should take it! Making small profits can build your confidence as a trader again. If necessary, take safe trades by entering a trade for a few minutes and slowly increasing the amount of capital in your trading account. This is the first step towards overcoming traders’ black and the fear of losing money again.
5. Decrease Your Trading Volume
While you gradually recover from the trader’s block, you need to decrease your trading volume to match your current reality. So, take fewer positions and trade smaller volumes. Now is not the time to make huge profits and increase your capital in your account exponentially. Instead, gradually rebuild your confidence and learn how to better manage the risk in each trade. Take small trades and get in and out of positions multiple times to gauge the market again until you are sure you have gone past the trader’s block.
Key Takeaways
- Forex trader’s block is a phenomenon where traders lose enthusiasm to trade due to fear of being unable to replicate past success or past failure.
- Every trader, including professionals, experiences trader’s block in their trading journey.
- To overcome a trader’s block, take a break from trading and increase your knowledge of the forex market to gain confidence.
- Gradually return by trading smaller volumes and leverages.
- Learn from other traders who went through similar situations.
Final Thoughts
Although trader’s block may initially seem challenging to overcome, these small steps will quickly change your approach and help you overcome it. The key is to gradually regain your confidence and not force new trades. Then approach the market with renewed focus.
Once you get a new routine going, you will be right back on track! Whether you were just starting off when you got caught up or already a pro, you can successfully overcome the trader’s block and realign with your trading goals.
