Psychology of Forex Trading
Excitements and psychology have a big impact on trader’s performance. There are many traders that simply fail because they can't control their excitements during trades. But, as I have a motto that “every average person can do Forex successfully”, I'm sure that by training, using right trading strategies, right money and risk management methods and following a solid trading plan, all the bad habits and psychological obstacles can be overcome.
Having a trading strategy fit to your personality, lifestyle and daily habits (a strategy that you feel comfortable with) is a key factor to control your psychology and excitements during trades. The main reason that I have introduced a collection of various strategies is to give the trader a vast option to choose his/her best suited one(s). A practically high winning rate strategy is the first step to boost your confidence and decrease your trading stress.
Stress comes from uncertainty. More uncertain you are about the outcome of an event, more stressful and panic you will be. So, if you can get assured (to some good extent) about your trade, your stress will dramatically lessen and you can control your psychology during the trade. My emphasis on the accuracy of the trading strategies comes from this fact that I think it is a very significant factor that you can rely on to overcome the stress of trading.
The second step toward controlling your psychology in trading is a simple, sound risk management plan. I urge the trader to set the best stop loss and take profit targets and calculate risk/reward ratio of any sought trade before entering it. If you know that your money and trade is under full control, there is not any reason to be stressful or panic. To give this a 100% practical usability I highly recommend you to prepare a pre-trade checklist and write down the full analysis of your trade (including the strategies or signals used, stop loss and take profit targets, risk/reward ratio, psychological mood, etc.). In fact, the aim of this practice is to transfer trading process from mind to paper and from a psychological to a mechanical state. As much as you can detach your expected trade from your mind (and hence psychology) and do a pre-trade on paper, you will be able to make more realistic trading decisions.
Always bear in your mind that the market is a separate thing from your mind. Sitting in a confined place in front of your computer may mislead you that the market acts according to your wish and desire but this is completely wrong. The outside world acts on its laws in effect of many real factors that are absolutely not under your control. Some novice traders make this big mistake and trade without realistic analysis too optimistic to succeed. A positive mindset needs for successful trading but don't forget that only doing accurate, realistic analysis you will reach your goals. You decide on the market, not the market act on your wish or desire.
Having a trading strategy fit to your personality, lifestyle and daily habits (a strategy that you feel comfortable with) is a key factor to control your psychology and excitements during trades. The main reason that I have introduced a collection of various strategies is to give the trader a vast option to choose his/her best suited one(s). A practically high winning rate strategy is the first step to boost your confidence and decrease your trading stress.
Stress comes from uncertainty. More uncertain you are about the outcome of an event, more stressful and panic you will be. So, if you can get assured (to some good extent) about your trade, your stress will dramatically lessen and you can control your psychology during the trade. My emphasis on the accuracy of the trading strategies comes from this fact that I think it is a very significant factor that you can rely on to overcome the stress of trading.
The second step toward controlling your psychology in trading is a simple, sound risk management plan. I urge the trader to set the best stop loss and take profit targets and calculate risk/reward ratio of any sought trade before entering it. If you know that your money and trade is under full control, there is not any reason to be stressful or panic. To give this a 100% practical usability I highly recommend you to prepare a pre-trade checklist and write down the full analysis of your trade (including the strategies or signals used, stop loss and take profit targets, risk/reward ratio, psychological mood, etc.). In fact, the aim of this practice is to transfer trading process from mind to paper and from a psychological to a mechanical state. As much as you can detach your expected trade from your mind (and hence psychology) and do a pre-trade on paper, you will be able to make more realistic trading decisions.
Always bear in your mind that the market is a separate thing from your mind. Sitting in a confined place in front of your computer may mislead you that the market acts according to your wish and desire but this is completely wrong. The outside world acts on its laws in effect of many real factors that are absolutely not under your control. Some novice traders make this big mistake and trade without realistic analysis too optimistic to succeed. A positive mindset needs for successful trading but don't forget that only doing accurate, realistic analysis you will reach your goals. You decide on the market, not the market act on your wish or desire.