Psychology is an essential subject in Forex. Psychological aspects influence the performance of traders. Emotions often affect our ability to analyze the market clearly and think cool-headed. Sometimes even large traders and lots of experience can not control their emotions when negotiating. Nobody is perfect. And we must say that markets, these capricious beasts, tend to punish those who lose their line or overestimate their abilities. Soon, marketers must be able to control their emotions so they will not be punished later.
What are the dangerous emotions?
Anxiety, fear and panic
Anxiety is one of the biggest enemies of traders. It tends to convince them that they will make money regardless of the strength of their trading strategy. So, instead of having high profits and earning a lot of money, they do not start any risky business, or leave positions before the necessary moment, being unable to wait for the achievement of their initial goals. It is the most common mistake of novice traders.
Also, people are not indifferent to their hard-earned money. They do not like to see their business acting against them. They will probably do something to stop the bleeding. And if they do not know how to act in this stressful situation, they begin to panic and take wrong actions that usually lead to losses. Periods of market volatility are the most common catalysts of such irrational actions. Larger price fluctuations result in loss of confidence in our business choices, we begin to question our strategies and try to change something at peak times.
Keep calm, the panic will only distract you. Remember your goals. Use the Stop Loss and Take Profit orders. After placing the protection orders, keep them.
Forex traders are money-oriented people. They want to make money and attach great importance to their financial success. Moderate amounts of this approach are well needed. But if these healthy stimuli / wills become obsessions, they can cause harm. You must learn to control your appetite for profits. Otherwise, you run the risk of emptying your pockets.
To prevent this from happening, you should apply a disciplined approach to your trading activities to minimize the role of emotions in trading decisions.
Sometimes traders fall into euphoria. They experience an intense sense of excitement and exaltation after a series of profits. They aspire to receive more in the future and see a truck of business opportunities. In simple terms, they make sure they have found a sure-fire approach to the Forex market. But in the long run, they are disappointed, because after the sun, comes the rain. The trader gradually begins to believe that no market analysis is foolproof; that the next business will not always be profitable. The period of euphoria ends, and the merchant becomes more careful in his future endeavors.
Do not get carried away. Know when to stop on your winning streak.
Enter the right mindset to successfully negotiate
The number one rule is to adhere to your initial trading plan and properly execute the basic rules of financial management. Follow a defined methodology. Rely on logic rather than momentum because in momentous trading you will probably forget about proper risk management. You should feel that you are making the right move and not worry about the eventual outcome.
Do not bury yourself in regret if the price continues to rise after you have closed your optimistic position. The market does not go away, there will be several other opportunities to make money.
Some authors speak of the “zone”: a combination of positive mindset, focused attention and adherence to the trade discipline that allows the best traders to continue producing extraordinary results day after day, year after year.
Dealing with losses
Get acquainted with the idea that losses will happen. There is not one merchant in the world who could make a profit in every deal.
Understand that you can not go back in time and run your trading again. It’s like being on a diet and eating chocolate cake. After you have eaten the candy, all you can do is go back to the gym and do exercises to burn the calories. The same goes for the market. When you lose money, analyze why it happened. Draw conclusions and use the knowledge and experience you have gained to improve your trading system. Do not think you need to win back the money you lost. Accept the loss and move on. Your goal is not to compete with the market. Your goal is to make money with Forex.
Becoming Psychologically Strong
Accept the fact that good results on the market require hard work. If you do not delude yourself that you will make huge profits right away, you will protect yourself from unwarranted disappointments and focus on your goal. Remember that Thomas Edison performed 2,999 experiments before inventing the light bulb.
Relieve your stress. Take breaks between negotiations and occupy your mind with something else. Take a healthy life with sports or hiking and a good diet. Spend time with your family and friends. All this will help you relax and have more power to negotiate.
Find some fellow marketers to discuss their fears and problems. Venting will help you calm down and get rid of stress.
Constantly increase your knowledge about trading and the Forex market. Take courses, read books and articles, learn from professionals. The more you know about negotiations, the more you will feel psychologically sound.
Linda Raschke’s winning formula
Famous commercial coach Linda Raschke in her book “Professional Trading Techniques” invented a special formula for successful trading.
So to earn more in Forex:
Passion: You need to have a driving force that will motivate you to succeed.
Belief: You must believe that you can achieve your goal.
Game Plan: You must have a strategy or business plan to attack your goal. Lack of organization and preparation is the main cause of failures in the negotiations.
Integrity: You must develop your own personal value system.
Commitment: You must remember that commitment opens up an unlimited supply of backup power within us. It gives us strength to keep moving forward every day, even when there is no visible progress.