The queen of forex demons, Euphoria, is a creature that promises unlimited wealth, and delivers unlimited misery and destitution. Euphoria works hard to ensure that wherever we look, we see nothing but wonderful prospects for limitless profits. It is as if the trader has somehow been blessed with the Midas Touch, with success being the natural consequence of his routine behavior.
Under normal circumstances, euphoria has little relevance for most traders, because most are aware that success in forex trading is not child’s play. While magnificent profits in a short time are sometimes possible, such gains are usually the result of a period of study and practice during which the false promises of euphoria are proven repeatedly to be meaningless. In the case of the beginner, who doesn’t possess this background of hard work and study, euphoria may result from a string of profitable trades, as the trader comes gradually to believe that his understanding of the markets is impeccable, his analysis, flawless.
The key here is the knowledge that the first condition for performing a flawless analysis is beginning with the assumption that no analysis is flawless. Consequently, the successful analyst or trader is always skeptical about the value of his explanations, although he doesn’t hesitate to act on them because he bases his work on logic alone. The profit potential of the next trade taken is independent of how profitable the previous one was. Consequently, there’s no sense in getting excited about a string of profits: the next trade may or may not be profitable, depending on how diligent our study of the market was.
Thus, the best way of avoiding euphoria is by understanding that a string of wins or losses does not impact the outcome of the next trade that we will make. The success or failure of the next trade is only dependant on how capable we are of excluding emotions from our study of the markets, and in that knowledge lies the alpha and omega of a successful trading strategy.