Common Mistakes: Lack of Confidence
Confidence is a part of being good at anything and clearly doesn’t only apply to Forex, but it is another piece of that brain mounted trading machine we have been talking about in these articles. Let’s consider how confidence is built in any other discipline and then we can apply it to Forex in the same fashion. This is more ‘obvious information’ but since we see “95% of people fail” flashed at us left and right, I guess most people aren’t considering everything the way they should.
So let’s consider confidence in a sport and how it can affect your performance. Confidence is something you build up and pump yourself full of by practicing and seeing your results. The more you practice the better you get and the better you actually feel about your skill level because you can see it. Other people can see confidence in you even though it is not tangible, your decisions and actions are immediate because you are not thinking about what you are doing, you are just reacting and everything is flowing naturally. Thinking delays your reaction time and lack of confidence may cause anxiety, you may trip over or fall in some way depending on the sport, you get the picture. Knowledge is power; knowing that you are good at what you are doing because you have proved it to yourself is real confidence. Nothing anyone can ever say to you will be the same as your core beliefs in yourself and your capabilities.
Applying this to Forex trading is easy; if you are not confident you will second guess yourself and make bad decisions, you will get anxious which will cause you to behave erratically and you may even watch your body doing things with the keyboard and mouse that you don’t agree with, yet you feel helpless and just let it happen. Getting extreme again I know, but once again you would be surprised at how common this is and unfortunately you will most likely even have to experience it yourself. Awareness is the key, in fact most of my articles are based on things that you will do and every other trader has done even though they read about it. You will never learn something as well by reading as you will by action. Where you need to separate yourself apart from the masses is that you only let these things happen once, acknowledge them and laugh at yourself, then don’t let it happen again.
So how do you build confidence with Forex? The same way as you would with anything except for it is a little more complicated or everyone would do it. You must have all the pieces of this puzzle working together and I will go in to that in much more detail when I write my article dedicated to creating your Trading Plan. For now though let me reference a couple of puzzle pieces that directly influence confidence. After creating the ”˜trading method’ part of your trading plan you will just KNOW what to do in every situation without second guessing yourself, practicing on demo both in forward and back tests will prove to you that it works. You will start seeing your mistakes and correct them, until your demo trading is perfect and your results are consistent. This will pump you full of confidence because you are actually seeing it work; you will then KNOW that what you are doing works and that you are capable of making the right decisions at the right time. Your confidence will build up and you will be ready to start trading the same way using real money.
Real money will introduce emotion and that may mess with that confidence you just built so I will write about that next. All I can say to wrap up this article is that you should always start your real money trading very light because your journey is only just beginning. Demo trading confidence can soon be taken away by live trading so don’t go getting over confident too soon. Demo trading confidence is confidence that your trading method works consistently and a great start, but live trading confidence is a different animal.