1. 36 FX TRADER MAGAZINE July - September 2015
How To Eliminate Emotions from Trading
Psychology plays a significant role in
trading as it does in a game of poker,
or even in athletics, such as tennis or
football. Mastering the psychology
of trading is one of the most difficult
elements of learning how to trade on
the market.
Besides gaining the basic knowledge of
the market structure and the ability to
understand how the economic machine
works, the idea of trading, in the
end, is to avoid losing. The ability to
control your emotions and maintain
discipline is the most important
skill you should develop. A trader
must learn to contend with market
challenges of individuals and the
crowd psychology in order to progress
from a novice to an expert.
If you want to make profits when
investing in different asset classes,
such as currencies, indices, equities,
commodities, or bonds, you have to
understand that trading is primarily
a game of psychology. Only the
toughest players survive. The real edge
separating professional traders (those
who make a living from trading) from
failed traders is clearly their mental
approach to the market.
What You Need To Become a
Successful Trader
Consistent practice and focus are required
to become great at nearly anything,
including trading. This practice requires
patience, discipline, determination, and
most importantly, the ability to control
your emotions. The number one question
I receive constantly from traders is: ‘‘How
do I become a professional trader?’’
The reality of the situation is that only
10% of traders can make a living at it,
and only 5% of traders make a lot money.
Sure, everyone makes a winning trade
by Efthivoulos Grigoriou
In this article, the author unveils his personal trading approach, which he built during his professional trading
career, and which allows to remove the emotional part of trading by gauging the emotions surrounding the market
or a specific instrument, and by applying some consistent rules.
TRADING PSYCHOLOGYFX

2. FX TRADER MAGAZINE July - September 37
FXTRADING PSYCHOLOGY
occasionally, but in the long term, their
portfolios and their accounts remain
about the same or even dwindle down
to nothing. There are all sorts of reasons
for this, such as bad timing, poor risk
and money management, lack of trading
discipline, unrealistic expectations, such
as the expectation to get-rich-quick, and a
lackofknowledge.
I’m sure we’ve all been here before - you
makeatradeandendupinawinningone.
Before you realize it, you are in a winning
streak. At this point, you feel like you have
masteredtradingandyoucouldovercome
any market condition. Therefore,
continuingyourwinningstreak.
This is completely understandable, as it
is a natural human emotion to express a
positive reaction after a win. But we’ve all
been on the other side as well. When you
enterintoatradethatdoesn’tworkoutthe
way you wanted, and eventually after the
market bottomed for a few times and
you have remained in the trade with a
hope that it will turn in your favor but
it didn’t, and you close the trade in a
huge loss.
At this point, you become angry and
frustrated and you want your money back.
Thus, we come back to the cycle of market
emotions, which explains the relationship
between our feelings and our judgments.
Figure 1 is a visual representation of the 11
stagesofthecycleofmarketemotions.
Trading Is Not a Hobby
Since trading is a business, we should
treat it as a serious business venture, not
a hobby. Therefore, we must separate it
from our personal lives. The world of
trading has very little room for emotions.
There is only room for calculated, well-
planned decisions. Our emotions have
a tendency to skew the decision-making
process, and far too often, they generate
poor decisions that lead to losses. Success
or failure in the business world can bring
out the best and worst emotions. Clear
thinking, experience, discipline, instinct,
and skill are essential, especially in the
trading world. So our emotions must be
keptundercontrol.
Trading Is the Study of Mass
Behaviour
The market is the result of collective
human behaviour. It is a perfect and
measurable representation of collective
optimism or fear. The movement of the
market is the movement of the mass
psychology. Many traders lose money
because they fail to realize that looking at
a chart of the market is like looking at the
collective psychology of its participants.
For this reason, professional traders
place a heavy emphasis on studying price
action and volume relationships, which
help guiding them in their trading. And
here comes the Golden Rule of Trading:
‘Trend is your friend, so trade with the
trend’. In other words, do not fight the
market, just go with it.
Eliminating the Emotional Part
Is the Key to Success
With that being said, I’d like to discuss
the emotional part of trading, which in
my opinion is the key to becoming a more
refined trader; the first step to success in
trading.Toachievethissuccess,youneed
to learn how to control your emotions, or
how to eliminate them.
If you manage to understand human
psychology and what motivates buying
and selling decisions, you will be able
to position yourself ahead of the action.
This way you can anticipate profitable
trade setups.
Figure 1: The Cycle of Market Emotions Source JFD Brokers

3. 38 FX TRADER MAGAZINE July - September 2015
The four emotions that traders suffer from
most often are fear, hope, greed, and regret.
You need to suppress these emotions to
be successful. Letting emotions control
trading decisions is the biggest mistake
any trader can make. Experiencing many
consecutive losses
is emotionally
difficult to handle
and can test a
trader’s endurance
andresilience.
Fear and greed, or
trying to beat the
market, can lead
to cutting winning
trades short and
lettinglosingtrades
run out of control.
Remember, the
true battle is not
between you and
the market, but
in learning how
to control your
own emotional
impulses.
Don’t forget, it’s
very important to
understand that all
instruments’ price
action is completely dependent on the
emotional reactions of the various market
participants. Without emotions, prices
would sit flat, since people are the main
catalystsformarketmoves.
Price Is King!
I have read a lot of books and attended
a lot of seminars, all of which ended by
telling the audience that controlling your
emotions and having discipline in your
trading are essential elements of success -
but no one tells you how to achieve this
emotional control and personal discipline
whiletradingonthemarket.
When I think back on my early trading
career, I remember the times when
I continuously changed my trading
technique in order to achieve the best
results. But no matter what technical
indicator or trading system I used, I
always yielded the same result: losses. It
did not matter what I did, I had to fix
the real problem, and that was in my
mind. Therefore, I had to control my
emotions when I dealt with the market.
As I have mentioned in previous articles,
priceisking! Ihavehadmoreconsecutive
winning trades since I started paying
closerattentiontopriceaction.
How to
Eliminate
Emotions
from Trading
When analysing
the market, the
first thing to do
from a technical
perspective is
to identify the
market trend
and determine
the support and
resistance levels.
How do we do
that? By drawing
trend lines. How
exactly these lines
are drawn will be
discussedinanother
article, since it
is a complicated
subject. I’ve had
the opportunity to
meet some traders
who draw trend
lines just with one glance at the market.
This is not the approved method and, if
you have this habit, you’d better get rid of
it. Why? Because you must have some strict
rules and these rules will make your trade
easier and free from emotions. Generally,
rules demolish emotions and emotions
demolish our trading accounts. Therefore,
less emotions mean more opportunities
forbetterresults.
The world of trading has very little room
for emotions. There is only room for
calculated, well-planned decisions
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4. FX TRADER MAGAZINE July - September 39
FXTRADING PSYCHOLOGY
This brings us to my theory, which I
discovered through my own trading
experience. The theory is that by gauging
the emotions surrounding the market or
a specific instrument, and by having some
consistent rules, you can control and even
eliminate your emotions when trading.
Trend lines that
servetoidentifythe
market trend and
determine support
andresistancelevels
are the primary
tool I use to gauge
the emotions
surrounding an
instrument or the
marketoverall.
But the secret
comes down to
the support and
resistance levels,
which are the keys
to understanding
which trends or
lines are most
valid. These are
based on the
traders’ emotions,
since support and
resistance levels are
largelyshapedbythoseemotions.
Therefore, I identify the participants in
the market by drawing a trend line, on
that particular instrument which could
be a stock or a forex currency pair at any
given moment. Then I determine when
the next level of market participants
will buy or sell, based on the validity of
the trend lines, including support and
resistance lines.
I am going to explain what support and
resistance levels are, and I will show you
the basics of how I find these levels on a
chart. This unique approach shows you
which prices are apt to stall or rebound
before they change at all, and which
ones are most valid. This is really a very
unique approach, which is why I like it,
as it involves NO emotion, just reaction.
Support and Resistance
Levels
Support and resistance levels are largely
shaped by traders’ emotions and this is
where the forces of supply and demand
meet. Support and resistance levels
are where you really see the ongoing
battle between the buyers (bulls)
and the sellers (bears). The continual
battle between the bulls and the bears,
which takes place near the support
and resistance levels, is what makes the
market a fascinating study of the basic
laws of supply and demand.
Many traders look
at these levels
to gauge entry
and exit points
for their trades.
These levels can
be drawn by
using technical
analysis tools, like
rising and falling
trend lines, or by
applying more
advanced method,
such as Fibonacci
R e t r a c e m e n t
(ratios).
A support level
is formed when
the price tends
to find support,
p r e v e n t i n g
the price from
declining further.
This means that the price is more likely
to ‘‘bounce’’ off this level rather than
break through it. However, once the
price has broken his level, it is likely to
continue dropping until it finds the
next support level.
A resistance level is the opposite of a
support level. It’s when the price tends
to find resistance, preventing the price
from rising further. This means that the
Looking at a chart of the market is like
looking at the collective psychology of its
participants

5. 40 FX TRADER MAGAZINE July - September 2015
TRADING PSYCHOLOGYFX
price is more likely to “bounce” off this
level than break through it. However,
once the price has broken this level, it is
likely that it will continue rising until it
findsthe next resistance level.
Trading Approach
In my trading approach, I first start to
apply the technical analysis method on
a specific instrument by determining
the market’s overall direction, using a
trend line. From then on, I identify the
psychological support and resistance
levels of an instrument (i.e. GBP/JPY)
in conjunction with tops, lows, or
inside swings. To do this, I use a higher
timeframe, for example, a weekly
timeframe rather than a daily one.
Psychological levels occur when prices
end in multiple 0s. Traders tend to
be drawn to these psychological price
levels for several reasons. One is that
these prices have been important in the
past and traders know they are likely to
be important again. If a level worked
in the past, as a support or resistance,
the trader may assume that it will
provide solid support or resistance
again in the near future, like 1.2000
in EUR/USD, 1.7000 in GBP/USD
and 175.00 in GBP/JPY.
Then I switch to a lower timeframe,
such as a daily timeframe, and I
identify the support and resistance
levels from that specific timeframe. If
the support and resistance levels taken
from the weekly timeframe coincide
with the daily ones, I determine that
those are strong and significant levels,
and set them as targets. These levels
may attract more attention and create
more anticipation among the traders.
Now that I have set my target levels,
I switch to a lower timeframe, such
as 4-hours, and I identify the rest of
the support and resistance levels. If
some of these levels coincide with
the ones from the higher timeframes,
they also become significant and I
will use them as targets for my short-
term approach. I use the support
and resistance levels taken from the
higher timeframes as targets and
exit points for my medium-term
approach.
Then, I have the option to switch to
Figure 2: EUR/USD 1-H chart Source JFD Brokers
Figure 3: GBP/JPY Weekly chart Source JFD Brokers

6. FX TRADER MAGAZINE July - September 41
FXTRADING PSYCHOLOGY
a lower timeframe and identify the
remaining support and resistance
levels, which I will use to determine
my entry points as well as my stop
loss points.
I also find that timeframes are very
important to my trading because
what often appears to be a major
support area on a daily chart might
be nothing more than a correction
on a weekly or yearly chart.
Finally, I get a confirmation for the
most significant levels in conjunction
with a 100-period SMA, as well as
a 200-period SMA, from the 4-hour
chart going up to the weekly chart.
Both of the moving averages act
as a confirmation of these levels,
which make them more valid if they
coincide with any of these levels.
Conclusion
Trading is like war. You are battling
some very smart, experienced and
very well capitalized opponents.
To be successful, you need to
have an edge, because psychology
plays a major role in all forms of
trading. For this reason, you need
to consistently keep your emotions
under control. This can be a tough
task when money is involved,
but it can be accomplished by
establishing and focusing on these
set plans and rules of action.
If you consistently follow your
rules without breaking them,
you could eliminate emotions in
trading. And if you achieve that, it
can help you improve your trading
decisions and, thus, trading will
become an art!
Back in 2005, when I was studying
in the United States, I had the
opportunity to meet with a
professional trader. I remember
that the last thing he said to me
before I left the States was, ‘‘the
most important way I grew as a
trader was by learning to control my
emotions. Control and eliminating
your emotions in trading correlates
strongly with success.” It took me
five years to build my confidence
and find a way to control and, in
the end, eliminate emotions in
trading.
Efthivoulos Grigoriou
Head of Global Research and Analysis
JFD Brokers
Figure 4: GBP/JPY Daily chart Source JFD Brokers
Figure 4: GBP/JPY 4-H chart Source JFD Brokers