If we make a bad trade, often times we are well aware that we should not have done it to begin with.

Why do we do this?

Sometimes knowing why could help cure us of this problem, at least it is a start…being aware of why we do it.

Each one of us will do it for different reasons. But for the most part, there are some pretty common emotions we all go through that cause us to take trades when we know we should not.

The first reason for taking a bad trade and breaking our Forex trading strategies when we know we should not is simply for the excitement. After spending many hours in front of the computer and either missing previous trades or not having the nerve to take the ones we should, we enter because we just need something to do.

Another reason: the simple desire to make money…GREED!

Another reason: because we are so convinced we know the outcome regardless of whether or not we actually have the experience.

Fear is also another reason. Often times our fear keeps us out of trades however waiting too long and experiencing fear for a great deal of time may cause us to simply jump into a trade regardless if it is a valid one.

The first step to break these habits is to realize why we are doing it. It may take some time to actually analyze your behavior but you must stop what you’re doing, this means no trading and spend some serious time contemplating the reasons you are making these mistakes and breaking your trading rules.

It may help to look at the problem like this, ask yourself…
“what do I get out of taking a trade even if it’s a bad one?”

I know this may seem an odd question but there is something we are actually getting out of a bad trade, we just need to figure out what it is. As I mentioned earlier sometimes realizing how silly or stupid the reasons are may help break us of these habits.

Afterwards, once we have determined the reasons we take these bad trades and break our rules, we need to dig really deep into our thoughts and emotions and convince ourselves that this is a serious problem that must be broken. A good way to present the seriousness of this situation is to realize all of the things you’re going to lose by making this mistake over and over again.

Because they say we will do more to avoid pain than pleasure, listing all of the things we’re going to lose if we continue this behavior may create enough pain for us to keep us from making this mistake.

This all may sound easy but it will take some time and you have to be completely open and honest with yourself.

Afterwards, you must have some methods to keep you in check.
I like to grade my trades. You can give them a number or a letter but what I am basically doing is giving the trades that are perfect from entry to exit a good grade, and the bad trades obviously a bad grade.

I record my results after each trade and post my grades after each trade on a big white dry erase board in front of my desk. What I want to see is a string of good grades meaning the proper trade one after another. If I start to lose control I will obviously see bad trades and I need to review the charts/results to determine why and where I went wrong.

Another component to successful trading is discipline.

Having discipline isn’t as simple as saying you need it.
Discipline must run throughout your lifestyle.

I try to keep my trading environment a structured and disciplined one.
This means trading only at certain times, studying the markets at certain times including reviewing the charts and economic data for the day, and anything else that helps provide a degree of discipline in your life. This can even include sleep schedules, exercise schedules and even your diet.

Trading is a life long endeavor for me and I look for any thing I can use that will help me improve as a trader.

Take the time to review why your trading and why you are making mistakes. Sometimes it isn’t that easy because we choose to avoid what is painful in most cases. But the greatest pain comes when you lose all of the money in your account. I have often said that as traders money is our inventory like a storekeeper needs supplies in his store to operate.

We must do all we can to preserve our capital.

Thanks for reading,
Good luck,