Most new forex investors fail simple because they haven’t understood the forex trading psychology. Sure, reading theories help but you need to learn the art of being patient.
If you are looking to be a forex expert, the first thing to remember is that emotions are destructive, no matter what online trading platform you are looking to invest in.
You simply cannot rely on your feelings when you are trying to take an important decision because you will end up making a mistake.
Forex or Foreign Exchange is one of the biggest online trading platforms that you can join to earn profits. However, you must remember that trades are not usually consistent and you need to be in charge of all your feelings when you face ups and downs.
The longer you remain in the Forex community, the better control you will develop over your actions. Sometimes, however, all of us become vulnerable to trading demons who seem to control all that we do. It’s why you need to master the art of Forex trading psychology if you want to become a professional.
The 6 Things You Need to Know to Better Your Forex Trading Abilities
As long as you let your emotions control you, most of your trades are bound to go south. Remember the following keys.
Focus on One Method or Single Strategy
It’s easy to get overwhelmed, especially if you are new to the Forex world. To know what’s working for you and what’s not, you need to start with small steps. Focusing on one method or strategy first and tinkering it to make it better is what you need. If you try out multiple things together, you would get confused as to what’s happening, and it could lead to heavy losses. You surely don’t want that.
Fear should not control you:
Beginners in Forex trade are in constant fear of losing their money to a bad deal. Sometimes, even professionals give in to this fear which stops them from going into trade altogether. A popular phenomenon among many new investors is FOMO or the Fear of Losing Out.
You think you have got a great opportunity, and want to invest as much as you can so that you can get the maximum profits. You don’t want to lose out on the ‘potential’ profit that you could take. In turn, you tend to make higher risks and if you make a wrong prediction, you are sure to lose significantly more than what you would have if you had traded carefully.
Fear is one of the biggest obstacles that you have to overcome if you want to go ahead in your trading career. Firstly, it is irrational because there is a random distribution of wins and losses in the trading market that you cannot control. Secondly, it will stop you from entering profitable trades.
You must stop being afraid of losing money. To conquer the fear, you can try reducing the amount of risk you take with each trade. Cut down on the money you put at stake so that you do not suffer a major loss even if things do not go your way. Learn important techniques and strategies during this time so you can implement them in the future when you are no longer scared.
Do not let arrogance rule you:
Sometimes, traders become so confident about their winning chances that they stop trying to learn. This happens especially when traders have a long winning streak, or they win a very big trade.
However, becoming dependent on luck can be very damaging for traders who are looking for long-term results. Being knowledgeable and intelligent is more important than your wish to show everyone that you can win trades with no effort. Ignorance is one of the main breeders of arrogance and over-confidence because these traders are not aware of the basic working of Forex.
Blissful ignorance can only help till luck runs out. After that, there will be innumerable losses. Nobody has endless capital which is why you must be careful about how you spend it. Learn new strategies and tactics to identify good trades from bad ones. Do not hesitate to ask for help if you cannot understand something.
You are your own master:
Do not second-guess yourself at every turn because other traders will take advantage of your weakness. When you see the perfect trade which matches all your requirements, do not shy away from it because you do not trust your judgment.
Overanalyzing every little detail about trade will make you think it is flawed even if it is not. If you do not have the confidence to trade, the negative voice in your mind will take over. It will try to convince you that you are not good enough.
Always remember that you can clarify just about any doubt on the Internet. Moreover, you should find out what your trading edge is and then classify trades as good or bad accordingly. If you overthink why a trade might go south, you are basically trying to get ahead of the market, That has never worked out for anybody. Instead, trust yourself.
Do not let regret overcome you:
If you are a Forex trader, you must live with the fact that not all trades will be perfect. You are human, and you can make mistakes. Becoming a regretful mess will hinder all your future trades from being successful. You may have shied away from a trade that turned out to be excellent or you may have exited a trade early. In both these cases, you might have lost profit, but regret will not bring the opportunities back. Instead, you can learn from the experience and be a better trader because of it.
You can formulate a trading plan that will always help you stay on track, so there is lesser scope for regret. List all your strengths and weaknesses so that you can judge every trade objectively. If you still lose out on an opportunity, you should move on and try harder to win the next trade.
Never be thirsty for revenge:
Invisible forces run the market, and you cannot get back at it no matter how much you try. The human psyche is such that we try to score one over the market when things do not go our way. Being regretful over a lost opportunity is one of the main reasons why traders make rash decisions.
Revenge trade means that the trader does not think it through and just wants to win back the money they think they have lost. This hardly turns out well because these trades go south leading to even bigger losses which may give birth to more regret. Hence the cycle goes on.
Establish control over your actions and mind. Eliminate any thought of revenge trade as soon as it arises in your mind. Distract yourself, and then focus on a fresh new trade when you feel you are ready.
Gaining mastery over your own psyche is not as easy as it sounds, but it is not impossible either!