Conquering Impulsive Trading

Impulsive trading is gambling in another form, and it is one of the biggest downfalls for both novice and experienced traders. A trader hits a winning streak on a few trades and feels indestructible. 

From here they increase trade sizes and their previous rules for risk management go out the window. Many times, the forex trader also abandons their rules-based trading system, as the rush of potential easy money becomes overpowering. 

What to do if you have made a bad trade?  

Whether you’re a veteran trader or novice to the financial markets, taking a loss on a trade is an occupational hazard of the financial world.  

Sometimes you’ll make a wrong decision, set your take profit limit too high or a stop-loss limit too low. The worst is thinking you missed what feels like the trade of a lifetime.  

In these moments, you may be gripped with despair and feel as though you have made the biggest mistake of your life. It’s important to remember that not only are markets cyclical but that there is always a way to bounce back.  

Your trading experience is not measured by the number of failures but by how many times you recovered and made great trades. Today, we’ll share ways to bounce back and how to improve your chances the next time you trade. 

Anxious or impulsive trading 

Once your trade is set in motion, most market experts will tell you to let it take its course. New traders, however, are prone to make rash decisions if they think a trade will not work in their favor. They will then quickly close a position before it reaches its closing point in hopes of saving themselves from a losing deal. What they do not seem to realize is that an asset’s value will edge higher and lower during the timeframe they had chosen, so there is really no way to tell whether the position will go as planned or not right off the bat. 

As a trader, you should do your best not to succumb to anxiety over any indication of a position going bad while trading forex online. No one’s trading career is smooth sailing from the start, so take a deep breath and let your trade do its thing. 


1. Urgency

The trader is in a constant rush to hit the trade jackpot and is not prepared to grind out their trading results, (one trade at a time) instead the trader is looking for the one big trade to wipe out previous losses or to double their account in one fell swoop.

2. Trader Acts before he Thinks

The forex trader jumps in and wings it with no trade planning; pre, during or post trade and has a lack of patience for good trade set-ups to develop.

3. Lack of Confidence

Due to a knowledge deficiency of the instrument, they are trading or having a proven trading system. The impulsive trader is operating in random market conditions with nothing more than a coin-flipping strategy.

4. Thrill Seeking

The forex trader is seeking fun without thinking of the consequences. If you have deep pockets and this is how you roll, good luck to you!
For those traders (the majority) without the deep pockets, you need to recognize that trading is a business that you must grow and nurture. If you approach it like an all year round, bungee jump, you might have some fun in the beginning, but it will eventually end in tears.

So How do we Conquer Impulsive Trading?

1. Stop Jumping from one System to Another

You must identify a trading approach for your entries and exits that works 60% or more of the time and apply this to your trade execution under all circumstances.

At a minimum start understanding the unique characteristics of the instruments you intend to trade, what moves them, how they move and how this is reflected through price action on the charts.

Do not ignore the news, as a good knowledge of this will support your directional view and allow you to see the market with both eyes wide open. No system is 100% accurate. The skill is identifying all the factors and working out the probability of success in the current environment.

2. Create a Plan and a Set of Rules

Sticking to a rule-based approach, will help remove impulsive tendencies. You only enter a trade when one develops based on your trading a system and this should be your only approach when executing entries and exits.

Having conditions or parameters that are required before entering and exiting a trade will increase the odds that the trade will be successful. Fight the urge to trade under any other circumstances.

3. Focus on your Systems and Rules, not the Results

Having established an approach with an edge and a set of rules to your trading you now need to have confidence in your trade execution and decisions.

The focus needs to move away from results to the successful application of your system and rules. By taking this approach it should result in a positive profit curve over the medium term. Let the results take care of themselves.

By focusing on results only an impulsive trader might have a good day or week but could have a negative profit curve over the same period.

4. Find a Trade Buddy

A trading friend is a wonderful way to keep you on track. Your roles here are to question each other’s trade decisions on a weekly basis and help each other improve as traders.

I have found that this works very well as you will be less inclined to be impulsive when you must justify your trade decisions to someone else.

We are naturally impulsive creatures. If you want to sustain a long trading career you need to reign in this impulsive behavior by finding a system with an edge, sticking to your trading rules, and focusing on the execution as opposed to results, otherwise your lifespan as a trader will be short lived.

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