Managing emotions has always been one of the key challenges for traders, as an individual that succumbs to fear or impulsiveness is liable to make poor decisions. The creation and evolution of online trading platforms has given the modern trader more tools and opportunities than ever before, but having access to an expanded array of options can make it more difficult to keep emotions in check.
Trading platforms allow investors to switch seamlessly between various mechanisms, so it may be tempting for an over-confident trader to dabble in a market where their knowledge is low. Another double-edged sword of technology in trading is social media; while Twitter enables traders to follow connected people and keep their finger on the pulse, it is possible to be led astray by accounts posting erroneous information or advocating uninformed tips.
Handling that side of technology is an important task for the modern trader, while there are also several ways that technology can actively improve the ways that individuals manage their emotions. Here’s a brief overview of three of those ways.
A significant proportion of online forex brokers now present their members with the ability to use a demo version of their platform. With a demo account, traders can make real-world trades with virtual funds. There is no risk that the trader will lose money on these demo trades, with the caveat that they won’t make any real profit either.
However, the value of using a demo account is still considerable. Rookies looking to establish their preferred style of trading and veterans seeking to refine their strategies can both take plenty away from the simulation of a demo account. Because demo trading platforms harness accurate market data, this makes them the perfect place for individuals to get comfortable with the ways that markets behave.
By developing an understanding of market movements in the completely safe environment of a demo account, a trader will be better prepared to respond to any times of high market volatility when they start buying and selling with real money. Someone who has seen it all before in the comparatively relaxing demo platform will be in a stronger position to take everything in their stride.
All the planning in the world might not be enough to stop you from being caught out by an initial market response. You might have anticipated an interest rate announcement from the Federal Reserve that would send the US dollar tumbling against the euro, and that announcement may transpire exactly as you predicted. Yet market sentiment is a powerful and often unpredictable thing, so there may be an initial burst of confidence in the dollar’s resilience.
This may prompt you to quickly pull out of the trade through fear, even though conditions are now highly unfavorable. Whether or not the market direction reverses, that knee-jerk reaction to pull out of the trade reveals a lack of conviction and risks an unnecessary loss. This hypothetical situation can be avoided by handing over control to forex robots that complete trades automatically.
The biggest advantages of the best forex auto trading robots is that they operate within pre-determined parameters and that they are completely invulnerable to emotion. A forex robot doesn’t second-guess a trade or react impetuously to a piece of news; until there are the ideal conditions to complete a trade, a forex robot will not act. As soon as those conditions are fulfilled, the robot automatically finishes the trade. This stops traders from staring at market data all day with increasing self-doubt, while these robots ensure that every completed trade fits into the individual’s long-term plan.
Having a long-term trading plan is imperative, but emotions can often provoke a deviation from an intended strategy. While it is important to be flexible and reassess that plan regularly, there’s no point in creating long-term trading ambitions if they are immediately undermined by a rash move. For example, massively upping the size of your investments above your preordained budget could end in disappointment.
Not only is it crucial to produce a trading plan that covers your targets and acceptable risk levels, but it is also invaluable to keep comprehensive trading records. Traditionally people would log their activities in a journal, but this can now be done more easily on a spreadsheet. Make columns for your entry and exit point for each trade, the support and resistance levels, and the markets’ opening and closing figures. This might seem like an onerous task at the time, but keeping these records will pay off in the long run.
That’s because you can observe trends in your spreadsheet, whether it’s identifying types of trade that you perform particularly successfully or spotting areas where you misjudged the exit point. Reflecting on this objective data can stop you from succumbing to emotion. Rather than adopting a new strategy on a whim, you can look through your trading history and realize where your strengths lie.
Controlling emotions is easier said than done, but taking advantage of these three technological tools can assist traders in their adherence to a long-term strategy. By practicing on demo accounts, relying on automated trades, and keeping detailed records, a trader will be better-placed to calmly make informed decisions.