THE BENEFIT OF THINKING LIKE A ROBOT IN FOREX TRADING
Trading is mentally challenging, no one would say otherwise. Emotions are heightened, and fast decisions need to be made consistently and correctly over the long term, which can be incredibly draining for a trader. Often, human psychology is the downfall of most traders, but they don’t realize it – instead blaming their trading strategies or the markets.
In this article, we’re going to look at the benefits of thinking like a robot when you’re trading forex, how to implement this and what this will mean for your trading journey. So, let’s get into it…
Thinking And Trading Like A Robot
Trading, in many aspects, is incredibly challenging and there are many small pieces to a much larger puzzle. However, many traders make the same 2 core mistakes which hold them back from ever reaching profitability or becoming funded prop firm traders.
Firstly, successful traders are process-driven, not outcome driven. This is a huge mental shift that needs to occur in a trader’s mind. The successful traders focus on their process, rather than the outcome and gratification that follows as a result of this.
Secondly, many new traders have a very external locus of control. They believe the markets went against them, they were stop hunted etc. The reality is, although almost certainly untrue, it’s irrelevant.
Our successful prop firm funded traders all have one thing in common – an internal locus of control. They aren’t focused on what the market has done to them. Nor even trying to figure it out. They’re focused entirely on their actions – what they can do to be successful. There’s no blame, no looking externally for answers. This leads successful traders to creating an almost robotic process to follow, whilst entirely ignoring the external noise from the markets and everything else that may be a ‘scapegoat’ in your trading.
The Challenge Of Trading As A Human
Humans are designed to do many things – trading not being one of them. Humans are typically very emotional, and the stress of trading compounds these emotions, primarily fear and greed. The fear of missing a trade or losing money can negatively impact trader’s performance and cause many lost opportunities or unnecessary losses. Likewise, the greed of wanting more profits from the market will cause a lapse of judgment when it comes to trade selection and risk management, causing massive losses. We aren’t telling you to be emotionless whilst trading – that will never happen, you’ll still feel the highs, lows, and emotions. However, your execution should not change regardless of the emotion you’re feeling. This is where the ‘if that, then this’ approach comes in.
Using Simple ‘If That, Then This’ Approaches In Trading
The effects of emotions within trading can be numbed relatively well by adding a simple ‘if that, then this’ approach to your trading. Think about your strategy and your risk management approach right now. Break these down step by step, in an ordered sequence.
For example, this could look something like:
If daily time frame above 50 EMA
If 4H time frame is above 200 EMA
If 4H time frame touches 50 EMA
Wait for 4H candle close
If 4H candle closes between 6:00 and 16:00
Draw a long position, 50 pip stop loss, 100 pip take profit
Calculate lot size for 0.5% risk
Enter trade
Note, do not use this strategy, this is just an example.
By breaking the strategy down, you have to go step by step through the process, and this ensures emotions and bias do not affect your decision-making. You just need to hold yourself accountable to the above, and you will get the results, you should, from your trading strategy.
Abandon Money – Focus On Outcomes
Newbie traders love to focus on money, which makes sense, right? We all got into trading the markets in the hope of a better life for ourselves and our families, so money is what we are all looking for.
However, you cannot think in terms of money if you wish to be successful – money is a byproduct of consistently profitable trading over a period of many years. For example, when working in a corporate career, you don’t think about each task in terms of monetary value. You don’t look at an email in your inbox and think to yourself, ‘if I complete this task, I’ll get £75’. No, that would be ridiculous. Your job is to complete the task, and you’ll be paid as a byproduct of the tasks completed at the end of the month.
Many traders, however, focus on earning as much money as they can as quickly as possible. Often overlooking risk management and logic in most cases, in the hopes of a quick win – this always fails over the long term.
You must shift your focus and focus on the controllable. You can only control your trading execution, not the financial reward. You cannot predict the market or have any idea where it’ll be moving with complete certainty – no one does. All you can do is control your behavior and your actions in the market, and if you do that correctly for many years, you’ll amass a good amount of money.
It sounds counterintuitive, but you need to apply this. This is even more important when looking at prop firm trading. For example, our funded traders have up to £10,000,000 in live capital under management – if they were thinking about money on every trade, this would be incredibly stressful to manage.
In Conclusion – Using Robotic Logic In The Forex Markets
In summary, learning to condition your mind to think with an internal locus of control is a crucial first step in forex trading. Being process-driven, not outcome driven, is a key differentiator between profitable and unprofitable traders. To be successful over the long term in the markets, thinking as a robot would work is crucial. Break your trading down into ‘If that, then this’ actionable steps to execute upon, entirely removing human emotion and bias from the equation.
Are you looking to become a funded trader? Work with Lux Trading Firm today!
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Our commitment is to help traders excel and provide the tools and capital they need to compete in a marketplace defined by change and disruption.
We are focused on seeking out trading and investment opportunities to grow our capital in the global financial markets.
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