Why Forex Traders Need To Be The Boss Of An Amygdala Hijack

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Forex trading is a potentially lucrative and rewarding occupation, and to get ahead you need to be prepared to work hard and never miss a beat. It is a game that demands a hard head and emotional detachment in order to succeed.

Paradoxically, mastering true emotional detachment isn’t about attempting to turn yourself into an automaton, but about cultivating emotional intelligence. This will put you in control of every decision that you make, so that you are never at the mercy of emotions such as fear, greed, impatience, excitement, or anxiety.


The first step to really being in control of your emotions is to understand a little bit about how your brain processes them. There’s no need to delve into degree level psychology, but it’s really useful to know some of the science.

The part of the brain that is responsible for dealing with our emotions is called the amygdala. It also plays a role in other important functions, including forming memories, learning, and sensory processing. Furthermore, the amygdala is linked to a larger network called the limbic system, which is closely associated with emotional control and behaviour.


The amygdala deals with our most primal emotions, and in particular fear and anxiety. This is an evolutionary feature, because our ancestors had to be on constant alert for dangerous predators. Early humans faced life threatening situations on a daily basis, and their brains were primed to instantly recognise and respond to a potential aggressor.


When a threat has been identified, it triggers the sympathetic nervous system, AKA the ‘fight or flight’ response. This tells the body to pump more blood to the muscles in preparation for physical combat or a swift departure, so the heart beats quicker and the breathing becomes fast and shallow.


Now you may well be thinking, what does all this have to do with forex trading? Well, when we are trading, whether you like it or not we are dealing with a resource that is now the basis for our survival: money. It’s what we all need to keep a roof over our heads and ourselves and our families fed, not to mention pay for all the extras that make life feel worthwhile.


We may not be literally facing fearsome beasts slinking through the undergrowth looking for their lunch, but we are facing the mighty forces of the market with the potential to take our precious resource away from us. This evokes strong feelings of fear, and opens the gateway to all sorts of other intense emotions, such as anxiety, anger, greed, and outright panic.


Obviously, in the 21st century we still need this powerful response to dangerous situations, because sometimes we are in physical danger. However, a lot of the time the stressors are psychological, and we have no physical outlet for this sudden surge of adrenaline. This can lead to what psychologists call an ‘amygdala attack.’


This is a term that was first coined by the psychologist Daniel Goleman in his groundbreaking book Emotional Intelligence (1995). It describes the process where the rational brain is overridden by intense emotion, so that our reactions are not based on logical thought.

We have probably all ruefully reflected on a hasty action that was prompted by an intense emotion such as anger or fear at some point in our lives. For example, you might snap at a loved one who is asking seemingly trivial questions when you are anxious to leave the house in time for work, or curse at a sluggish computer when you have a looming deadline.


This is what Goleman defines as an ‘amygdala attack.’ You will probably have noticed some physical symptoms that accompany it, including a racing heart, fast breathing, tense muscles, and even feelings of nausea. After the attack subsides, you realise that your actions were disproportionate or inappropriate for the situation.


Sometimes there are no particular consequences for an attack. However, in certain situations they can be corrosive or even seriously damaging. It does not take much of a leap of imagination to realise how they can affect our performance as forex traders. It’s an activity that carries risks and uncertainties, as well as potentially lucrative rewards.


The fear of making losses or the desire to make profits can cloud judgement and lead to impulsive decisions. In the complex world of forex trading, this is a slippery slope that can lead to a downward spiral of further mistakes. For example, suffering one loss can provoke ‘revenge trading.’


This is a major reason why many beginner traders fail and ultimately decide to quit, and you will always find it featured in those ‘most common forex trading mistakes’ type lists and articles.


When a trader suffers a loss, the first step should always be to go back to the strategy to work out what went wrong, and refrain from making another trade for at least a day or two.


Inexperienced traders often scramble to try and recover their loss as soon as possible, relying on luck far more often than judgement. However, the forex markets are oblivious to human emotions or lucky strikes, and the only way to get a good result is through clear and rational analysis of the market conditions.


The revenge trader may have had a run of good fortune and therefore have a sense of entitlement and an exaggerated idea about their own abilities. A sudden loss can provoke anger or cause hurt pride and loss of face, or even feelings of shame and humiliation among colleagues, family members and friends.


This can drive an irrational and disproportionate reaction, such as doubling a position to try and recover the lost money. Because the trade was made in haste rather than because of a genuine opportunity existing in the market, it will only compound the failure and make the financial loss more painful.


This destructive cycle therefore needs to be broken or preempted before it takes hold.


How can you manage an amygdala hijack?

There is no sure fire way of preventing an amygdala hijack because it is an instinctive human reaction. Some people may be more prone than others; we all have different personalities, temperaments and life experiences that have shaped us as human beings. However, even the most hot headed and impulsive person can learn some control.

The first step is to identify situations where you are vulnerable to an attack, and recognise when one might be about to take you over. This will usually happen when you are about to make a loss, or just after you have made a loss. Your first reaction should always be to step back and stop trading for at least a day so that you can make a rational decision.

Physically remove yourself from the computer screen by going for a walk or making a cup of coffee, then take a few deep breaths. It can even be helpful to picture yourself doing this in advance of a bad outcome, so that you just need to reach the action down from the shelf with no extra effort.

You may find that engaging in a meditation practice such as mindfulness meditation is helpful. This is a way of training the brain to focus on the present moment and to look objectively at the world around you, rather than to become wrapped up in our habitual thoughts and feelings.

Some of the world’s most successful traders and businesspeople start their day off with 15 or 20 minutes of meditation to get them in the right mindset for the rigours of trading. When practised regularly, it can sharpen the focus and concentration of the mind, enabling you to more quickly and effectively step away from unhelpful emotions and recalibrate.

Once the moment of danger has passed, take a look at your trade in the cold light of day and try to work out why it wasn’t successful. Remember that losses happen to everyone, and you need to view them simply as business expenses rather than a sign of personal incompetence or a malevolent market that is out to get you.

Make an assessment of the current market conditions. Are there any factors that are causing uncertainty or volatility, such as an election campaign in a country with a major economy, or a natural disaster or outbreak of war? Maybe you underestimated the impact that these events would have.

It may be necessary to review and adjust your trading strategy so that it is more aligned with the market conditions. Make sure that you learn from the experience and mentally rehearse how you will deal with it next time.

Forex trading is a continual learning curve, not just for facts and figures but also in self-discipline and emotional management. With a little effort, it is possible to become more in charge of your own behaviour and set yourself on track to being a resilient and emotionally intelligent trader.

If you are looking for funded trading accounts in the UK, please visit our website today.

FTUK Funded Account Disclaimer

CFTC Rule 4.41 – Hypothetical or Simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, because the trades have not actually been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs, in general, are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

All our funded accounts come with a fixed equity stop out level. Once the account equity level gets below this fixed stop out bar, we will close all running trades and disable trading and access. The stop out level is a fixed value for each funding level, this means that any profit which has been made by the trader increases the loss allowance.

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