Psychology in trading forex

June 20, 2021

Do you think that success in the forex market depends entirely on the trading system or trading strategy you use? ARE NOT. Actually it depends mainly on your mindset as well as how you think and react to the market (Trading Emotions). However, most of the trading sites – the FX media ignore this, because they are just trying to sell you a “perfect” trading system or a robot that costs a few dollars. thousand dollars to win the market. If indeed their system is so good, or EA can earn you automatically, will they sell you? Why can't companies and financial institutions with billions of dollars buy such systems or EAs?

Why do most traders lose?

You may have heard that most people who try to trade forex lose money. There is a good reason for this and the main reason is that the way people think about trading is wrong. Most people enter the market with unrealistic expectations, such as thinking they will turn $1,000 into $100,000 in a few months, they will quit their jobs with difficult bosses and become self-employed. finance in the short term. This is crazy!. These unrealistic expectations have the effect of promoting a trading mindset that destroys accounts in most traders because they feel too much pressure or “need” to make money in the markets. When you start trading with this “need” or pressure to make money, you will be overwhelmed by emotions and will end up trading emotionally, which is the fastest way for you to lose money.

Trading Psychology: As a trader, have you experienced any of the following emotions?

Greed: There is an old saying you may have heard regarding trading in the markets with symbolic mascots: “Cows make money, bears make money and pigs are slaughtered”. Basically, it means that if you are a greedy “pig” in the market, you will almost certainly lose money. Traders are greedy when they don't take profits because they think a trade will forever go in their favor.

Another thing greedy traders do is "Pump more", simply because the market has moved in their favor, which you can add to your trades if there is a good reason to rely on them. on price action and have a calculated risk of not going over the limit, but if you are doing so just because the market has moved in a slightly more favorable direction, it is usually acting out of greed. Obviously, risking too much on one trade in the first place is too greedy. The point to note here is that you need to be very careful with greed, as it can sneak up on you and quickly destroy your trading account.

Fear: Traders become scared to enter the market when they have just started trading and have not yet mastered an effective trading strategy such as price action trading (in which case, they should not trade). real money translation). Fear can also arise in a trader after they run into a series of losing trades or after suffering a larger loss than they can emotionally tolerate. To conquer fear of the market, you must first make sure that you never risk more money than you can totally afford to lose on a trade. If you are completely okay with losing the money you are risking, then there is nothing to fear. Fear can be a very limiting emotion for a trader as it can cause them to miss out on good trading opportunities.

Bitter and Wanting to “Revenge”: Traders experience a feeling of “revenge” in the markets when they take a losing trade that they are “sure” to succeed. The important thing here is that there is nothing “for sure” in trading…never. Also, if you have risked too much money on a single trade and you end up losing it, then there is a good chance that you will want to get back into the market just to make a quick return on your lost money… . often just leads to another (and sometimes even bigger) loss because you're just trading on emotions.

Excitement: While feeling euphoric is usually a good thing, it can actually do a lot of damage to a trader's account after he or she hits one or a series of consecutive WINNing trades. continue. Traders can become overconfident after winning a few trades in the market, for this reason most traders experience their biggest loss period right after they have won consecutively. on the market. It is extremely tempting to get back into the market right after a “perfect” trade setup or after you hit 5 winning trades in a row… A distinction must be made between trading confidence and euphoria. over-excited after consecutive wins. You must always remember: Nothing is certain. Emotions are the enemy of the Trader.

Many traders start emotional trading and lose after they hit a winning streak. The reason this happens is because they feel confident and euphoric and forget about the real dangers of the market and any trade that could lead to a loss. The important thing to remember here is that trading is a long term game of probability, if you have a high probability trading edge you will eventually make money in the long run if you stick to your trading edge in a disciplined manner. However, even if your edge succeeds 70% of the time, you can still hit 30 consecutive losing trades out of 100…. So keep this in mind and always remember that you never know which trades will lose and which ones will win.

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How to have and maintain an effective trading mindset: TRADING MINDSET

Creating and maintaining an effective trading mindset is the result of doing many things right and it often takes a conscious effort on the trader's behalf to do this. If you want to develop an effective trading mindset, you must accept certain realities about trading and then trade the market with these realities…

You need to know what your trading strategy (trading edge) is and you need to master it. You have to become a “sniper” in the markets instead of a “machine gunner”, which involves knowing your trading strategy inside and out, understanding it, mastering it and making it happen. into your confidence. When the opportunity comes, you just aim and shoot.

You need to always manage your risk properly. If you don't control your risk in EVERY single trade, you will open the door to trading emotions take over your mind, and I can promise you that once you start to stumble With the steep slopes of emotional forex trading, it can be very difficult to keep you from falling for the 2nd, 3rd, nth, etc., or even realize that you are trading emotionally in the first place. You can largely eliminate the possibility of becoming an overly emotional trader by only risking an amount per trade that you can afford to lose. You should always be aware of the very real possibility that you could potentially lose this amount of money on this trade.

You need not to over-trade. Most Traders are Over-Trade. You need to know with 100% certainty your trading edge and then trade ONLY when it is present. Once you start trading just because you “feel like it” or because you almost see your trading edge… you start a roller coaster of emotional trading that can be very difficult to stop. . Don't Over Trade if you don't want to be an emotional trader.

You need to become a PLAN trader. If there is one thing that is the “glue” that holds all the points I discussed in this section together, it is a PLAN trader. You have a trading plan and a trading log and actually use both of them consistently. You need to think of forex trading like a business instead of like a trip to the casino. Be calm and calculated in all your interactions with the markets and you will have no problem stopping the emotional trading demons.

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You need to have the right understanding of trading: Trading Mindset (Winning long-term trades thanks to the law of probability: Profit ratio >1 in the long-term will bring you victory; and there is no such thing as a winning trade. 100% sure win), then follow the right plan with a right trading strategy, keep a trading journal and recognize your mistake in each trade you will improve day by day and become a trader professional translation. In your trading plan must include: Trading system (Trading Timeframe + Entry Point + Take Profit + Stop Loss) and risk management plan (allocation of capital for each trade, how to close partial profits, what period to avoid trading) and psychological control plan (limit trading after consecutive wins or losses)….You can try to start trading with PRIMEXBT

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