Mistakes are a part and parcel of life. Without mistakes, no individual would ever improve beyond the level that he or she has already reached. However, when it comes to the foreign currency exchange, there are only so many mistakes that you can make before your account gets wiped out.
More importantly, you cannot keep repeating your mistakes on the foreign exchange if you have any plans to grow your account. This makes it imperative for you, as a forex trader, to learn how to deal with mistakes. Consider the following.
Control Your Reactions to the Mistake
Mistakes can often end up being more damaging than they should be simply because of the way traders react to them. If the trader makes a mistake on the foreign currency exchange and then compounds it by emotionally deciding his future moves then his losses will only grow in size.
This is why the first order of business for you, right after you have made a mistake in the forex market, is to control your reactions to it. It does not matter whether you are feeling anger, frustration, or depression; you have to prevent these emotions from affecting your future decisions.
Recognise the Mistake That Was Made
Once you have controlled your reactions and regained composure, you should begin your analysis of the mistake. This means recognising what the mistake actually was and why you even made it.
For instance, you should consider various things like whether you forgot to do something, did something extra, misinterpreted something on the foreign currency exchange, or even failed to consider something.
Evaluate the Ramifications of the Mistake
You will have to assess the ramifications of the mistake as well even if they are not big. This is important because you need to realise the consequences of various decisions on the foreign currency exchange as this will help you understand the market better as well. You need to consider both tangible and intangible ramifications i.e. how the mistake has affected your funds and how it has affected your view of the market.
Learn from the Mistake to Prevent a Reoccurrence
There will be many lessons that will automatically come to you when you study your mistakes. These lessons are extremely important because the one thing you do not want to do on the foreign currency exchange is make the same mistake again and again.
Internalise the Lessons Learnt from the Mistake
You have to internalise the lessons that you learned by studying your mistake. Internalisation essentially means turning some concepts into beliefs and actions into instinct so that they can be implemented without conscious thought the next time.
Incorporate the Lesson into Your Trading Plan
While internalising the lessons you learn is important, the best way to prevent a mistake from reoccurring on the foreign currency exchange is to incorporate it into your forex trading plan. Once you incorporate the lesson into your forex trading plan, you will also make it easier for yourself to internalise the mistake.