Self-Sabotage In Forex Trading Strategies

This article looks at self-sabotaging behaviours and perceptions in forex trading strategies.

Self-Sabotaging Forex Trading Strategies

Evidence has shown that almost all foreign exchange traders experience one damaging loss in their career. This can be due to the forex market’s volatility and price movements; however, it is mostly due to trader mistakes. These mistakes can be either technical or psychological, but either way they can be detrimental.

What is self-sabotage on the forex market?

Self-sabotage refers to instances where one acts in a way that is non-beneficial to a desired result.  For example, you know you should do exercise to achieve a desired weight but are too lazy to go for a run.  By not engaging in exercise you will be sabotaging your chances of losing weight.  Self-sabotage on the forex market involves behaving in ways that can sabotage the chance of a profit.

Below is a look at the different behaviours that can sabotage a profit.

Performance anxiety and interference effects

Performance anxiety can occur when an automatic trading behaviour becomes the object of attention and is focused on.  This focus is generally triggered by a damaging loss and causes one to scrutinise the behaviour.  This will cause an interference effect whereby one experiences a great deal of anxiety, leading to an inability to function.  These fears can lead to losses and account depletion.

It must be noted that performance anxiety is as prevalent during times of profit as during times of loss.  Evidence has shown that traders who experience losses can be as anxious when facing profitable trades.  The pressure of positive trades can cause heightened anxiety which can lead to mental ill health.

Perfectionism in forex trading strategies

Perfectionism is the most common source of performance anxiety among foreign exchange traders.  The majority of new traders enter the market with high aspirations expecting great profits in a short amount of time.  They will often set unrealistic trading goals that contribute to anxiety when they are not met.

In order to avoid this performance anxiety, one should set process goals instead of performance goals.  Instead of setting a monetary goal of earning a particular amount by year-end, try setting a process goal to follow a trading plan for 90% of the time.

Perfectionism and overtrading

Perfectionism can lead an individual to use forex trading strategies to overtrade.  This overtrading occurs when a trader feels an emotional drive to trade.  During a volatile market condition, he/she will partake in any opportunities regardless of whether they are fitting to the forex trading strategies.  This impatient behaviour can lead to detrimental losses.

Overtrading can be seen as a divergence from one’s trading plan.  The best way to avoid or overcome this damaging behaviour is by returning to the structured trading plan.  Discipline when trading can also help overcome this potential self-sabotaging behaviour.

Self-sabotaging self-perception

Self-perception is not necessarily behaviour, but it is linked to the patterns.  Some traders experience performance anxiety due to the belief that they have emotional difficulties.  They believe their mental ill health will affect their trading.  This self-sabotaging behaviour is known as a self-fulfilling prophecy that leads to detrimental losses.



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