Making impulsive trades is the downfall of many forex traders. Look up impulse and you will find it is defined as ‘acting without forethought’. So, making impulsive trades is literally trading without giving your actions a second thought. All traders do this from time to time but making a habit of acting impulsively will reduce your profitability. How can you fix this?
The good news is that it is actually very simple to fix this mindset before you start trading on your preferred MT4 platform, even if you are by nature an impulsive individual.
Impulsive people don’t plan for the week ahead. They live by the seat of their pants, making trades whenever the mood strikes or Mercury is in retrograde. If you want to be a successful forex trader, you need a plan.
Look at your economic calendar. Are there any important events coming up in the week ahead? Decide which currency pairs you are watching. Study your charts and decide what your limits are when you start trading forex. You don’t necessarily need to write this down, but many traders find it helpful.
They key is not to trade without some kind of simple framework for your decision-making. It forces you to be more systematic. Rather than making decisions on the fly, you work within a plan. If the forex trade that you want to make isn’t within the parameters of your plan – e.g. you have seen a tip about a currency pair you’ve never traded before – disregard it. Venturing off in a different direction is bad news and will probably cost you your profit margin.
Just because you want to make trades, it doesn’t mean you have to. Look for opportunities to trade, but don’t force it. Get into the habit of scanning your charts and studying the markets objectively. Set aside a small block of time to perform this task. Be clear in your head that you are only looking and if nothing interesting shows up, you are going to walk away and do something else. Only trade when market conditions dictate it’s a smart move.
The more you stare at your charts, the more likely you are to make an impulsive trade and blow your trading capital out of the water. It’s an easy mistake to make, especially when you are first starting out.
Work in 24-Hour Blocks
Treat each day as a new block of time. Learn to monitor the daily charts and use them to make a more informed decision about your trading activities. You can also use weekly charts if you really want to slow things down.
Sticking to daily or weekly charts forces you to slow it down. This is helpful for traders prone to impulsive actions. Remember, experienced forex traders don’t sit chained to their computers, waiting around for the profitable trading options to come to them. They have a plan and they trade only when the market conditions are right. Never chase the market. If you miss an opening, there will always be another one.