Eagletrader Futures Trader Challenge: How to Build a Sustainable Profitable Trading Psychology

　　”The Godfather of Wall Street” Benjamin Graham once said: “Your biggest enemy is not the market, but your own emotions.” In the trading field, even if you have an efficient trading strategy and detailed trading plan, the trader’s own emotions may inadvertently interfere with the execution of the plan, so that operations that were originally expected to make profits eventually ended in losses. So how to build a sustainable and profitable trading psychology and how to maintain rationality and calmness in the complex and changing trading market? The following Eagletrader foreign exchange traders will discuss it together.

　　Cognitive reconstruction

　　The essence of the foreign exchange market is a game of probability and uncertainty. The key to profit lies in risk control, not accurate prediction.

　　1. Rational use of leverage

　　Many traders have a misunderstanding that leverage is just a tool to amplify returns, but ignores it and also amplify greed. In fact, the use of leverage should closely link the risk tolerance of the account, rather than just focusing on potential profits. We can ensure the reasonable use of leverage through formulaic risk control methods: a single loss should be controlled within the net value of the account
Within 2%. For example, for an account of $10,000, the stop loss of a single transaction should be strictly controlled within $200.

　　2. Strategic thinking to deal with extreme market conditions

　　In the foreign exchange market, although extreme market conditions similar to “black swan” are difficult to predict, they occur from time to time. 2015
In the Swiss franc black swan event in 2018, many investors lost their positions due to no stop loss or excessive use of leverage, which sounded the alarm for the market.

　　Response:

　　Extreme stress test: We must plan the worst, assuming that the account may appear as high as 20% in a single day
In this scenario, plan the position distribution in advance to ensure that the account also has certain risk resistance in extreme market conditions.

　　Distributed trading:Do not concentrate all positions on the same high-risk event window, such as the non-agricultural data release period. Because the market fluctuates violently during this period and is extremely uncertain, concentrated holdings will undoubtedly amplify risks. By spreading trading periods, the impact of a single event on the account can be effectively reduced.

　　Emotional Domination

　　Human emotions are the product of evolution, but in the field of trading, these emotions need to be systematically constrained to avoid negative impacts on trading decisions.

　　1. Manage fear and greed

　　Fear management:

　　Stop loss discipline: Traders should set stop loss when entering the market and regard the stop loss as a normal “trading cost”, rather than
“Failed sign”. Such cognitive changes help overcome psychological barriers that are afraid to stop loss due to fear.

　　Review method: make three types of attributions to loss-making transactions, namely technical errors, psychological deviations and force majeure. In this way, fear caused by a single loss is avoided to generalize into subsequent transactions.

　　Greedy Management:

　　Mobile Take Profit Strategy: You can use retained 50% of the position to follow the trend, and the remaining 50%
Strategy for taking profit in batches at key resistance levels. This not only allows you to obtain more profits when the trend continues, but also lock in part of your profits when the market reversal.

　　Profit withdrawal mechanism: transfer 30% of net profit out of the account every month to reduce the “casino effect” caused by the continuous increase in account funds, and avoid blind transactions caused by excessive greed.

　　2. Avoiding decision fatigue

　　Most traders’ brains are prone to fatigue after trading continuously for a long time, resulting in a decrease in concentration and no longer making clear decisions, which in turn increases the possibility of losses.

　　Solution:

　　Time-session cutting method: Limited to 2 trading windows per day (such as the opening of the European session and the mid-term of the US session), and close MT4 for the rest of the time;

　　　Automation tool assistance: Use preset orders (Limit Order/Stop Order) to reduce real-time market focus demand.