Forex Risk Management

The Overlooked Risks Of FX Trading

There are some very obvious risks when it comes to trading, things like the loss of your account, the stresses that it can put your body under, and unfortunately, the death of a dream to becoming a full-time trader. Along with those more obvious risks, there are some more little hidden risks to both your trading and your overall health, we are going to take a little look at what they could be.

The Risk of Isolation

It is very easy to get yourself wrapped up in both the excitement of trading and also the feeling and need to do better. Trading is a long process and takes a lot of time to learn properly, putting too much time into it could cause you to begin to isolate yourself from those around you. Becoming obsessed with doing better will take up most of your time, taking it away from your job, my family, and your friends. You need to remember to make time for them too, do not spend every waking minute looking at the markets, set time aside to trade, there are other important if not more important things in your life to trading, be sure to give them enough attention too.


The Risk of Boredom

Sat in front of the computer for hours on end is not for everyone, some people can do it no problem and won’t get bored at all, but for most people, it will begin to cause boredom, and boredom can be very detrimental to your trading. When you become bored your concentration levels drop, and so does your motivation. These drops can cause you to stop looking at things in as much detail and can also lead to you making trades that you otherwise would never have made, just based on the fact that you no longer want to be doing that.

The Risk of Overconfidence

Being confident is a good thing, but being overconfident is not. It is easy to get to this stage if you have just had a large number of wins in a row. This can make you feel invincible and unfortunately, you are not. People in this frame of mind will often start putting on additional trades or at a higher trade size increasing the risk to hit the account, they may also stop using all of the criteria that were set out in their trading plan, again, increasing the risk to the account. In the end, this sort of thinking will only lead to an increased number of losses.

The Risk of Sequential Results

By this we simply mean that you can go on runs of wins or losses, both can have negative effects on both your mood and your account balance. We briefly mention in the section above about becoming overconfident when we have a large number of wins in a row and the difficulties that come with that. When you have a string of losses in a row it can have the opposite effect. It can make you start to doubt your own abilities or the strategy that you have created, this can give you a fear of putting on more trades and can make you miss out on some perfectly good trading opportunities.

These sequences can actually occur with both wins and losses, win one, lose one, win one, lose one, and so on. Extended times of these alternating results can put you off as you are not seeing any gains overall, but that is just how the markets are, every trader will experience the sections of their trading careers, it is just about sticking with your plan and getting through them.

So those are a few of the more hidden risks to both yourself and your account when trading, there are more, in fact there re probably hundreds of hidden risks, if you feel that you are doing something or having an emotion that may be putting yourself or your account at risk, simply step away, take a break, refresh your mind and then come back with an open mind ready to move on from whatever was causing the risk.


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