You’ve heard that playing the market is a mathematical game. Plug in the right numbers, make the right calculations and you’ll come out ahead. So why is it that so many traders end up on the losing end of the market? After all, everyone has access to the same numbers, the same data, the same info – if it’s math, there’s only one right answer, right?
The answer lies in interpretation. The numbers don’t lie, but your mind does. Your hopes and fears can make you see things that just aren’t there.
When it comes to trading on the Forex market, winning is a matter of the mind rather than mind over matter. Any trader who’s been in the game for any length of time will vouch for the fact that psychology has a lot to do with both your own performance on the trading floor and with the way that the market is moving.
When we say, trading psychology is about how well you as a Forex trader know yourself, your strengths, and your weaknesses. It’s about how well can you put your strength to good use, and control your weak points. This decides how successful you will be.
When you know yourself, and are aware of how you will react under certain market conditions, and what you will do to protect yourself from self-damaging decisions, you make the most of ever changing currency market environment.
The overlapping line between trading and psychology is very fine and therefore complex. Psychological factors, like performance anxiety do come in the way while a trader is trying to make a decision in the market irrespective of how clear headed he might be.
In the same manner poor trading practices, like taking on too much risk with big lot sizes, can increase the normal stresses of the marketplace. I have personally seen many traders put their money at risk without giving it much thought and analyzing the market condition wisely. Such situations repeating themselves can frustrate a trader. And then there are grounded traders who base their trades on solid methods, but these may not be suitable for their talents, and skills they possess. There is also another aspect to it. A certain type of trade may not go down well with a certain type of trader. For example, a very short-term, aggressive method of scalping markets, for instance, may look encouraging in theory but may prove to be completely irrelevant and stressful with a person who is highly analytical and risk-averse type. Aggressive trading can be a disaster for someone who plays safe bets.
Then there are instances when trading psychology issues have little to do with trading. These problems are the results of some already existing problems that may not be solved by different trading methods. These problems can be dealt with some simple suggestions and tips that can help an individual understand and acknowledge the anxiety and then learn to control emotions and build discipline.
If you have read enough about trading psychology and think that information overflow might kill you, here is a capsule! Understand ONE simple thing – That your biggest enemy when you are trading is YOU. It’s not the market, or the market makers, or breaking economic and other world events. If YOU do not have a professional psychology then you will make the wrong decisions and lose money and there is no stopping and getting away from being a consistent loser. So let us discuss some keywords, and concepts that will help you to work with a professional trading psychology.
Be Disciplined. The problem with most traders is that they treat trade and window shopping on same scale. In simple language a trader should have a well chalked out plan with clear stop and limit levels, and he should make sure that his analysis takes the expected downside as well as the expected upside into account.
A wise trader will not let excitement, fear, or someone else’s influence make him decide what to trade, enter or exit a position unless he himself/herself sees sense in it.
An experienced trader understands that there are times when it’s better to be in an all cash position and watching the market from the sidelines.
Currency pairs are not your friends. Your friend is your trading psychology. So do not play favorites with currency pairs. Focus on the technical aspects and do the right thing based upon your own system that you have developed and learnt over time.
To be in the game and yet remain emotionally detached from the market and the excitement that its movement creates is another trait a trader should try to imbibe in his trading personality. Don’t go on checking the prices all day long. Prices are not important for a trader. Signals are. So wait for the signals and do not let your mind be engaged with one extra thing that has no importance. It’s a better idea to stay focused on the large trends and not try to react to every move that market makes or every news that market breaks.
A trader has to learn to understand these events and be prepared for them, and be able to take the appropriate actions. A good psychology takes into consideration that you cannot predict what is going to happen in the market.
One last important tip for you to keep at the top of your mind, make sure you are only increasing your position when prices move toward your targets (of course if you really want to add to your position). I have seen it many times that when a price starts to move it usually continues in that direction for some time. So do not add to your wrong positions with this hope that you recover the losses when the market turns around.
Knowing the above things is something that makes you a profitable trader. Do not look for trading systems and sophisticated indicators or robots. They don’t work. If you still lose, it is because of yourself, not your trading system or the market. Understand and learn that trading doesn’t mean clicking on the buy or sell buttons. Everybody, even a 4 years kid is able to do that. Discipline and patience is the key. Waiting for the right and strong trade setup is something that makes you a profitable trader, not taking several positions per day. Setting proper stop loss orders is something that saves your capital and helps you keep on trading and making money. Taking too much risk with wide or no stop loss orders can only wipe out your account and prevent you from trading.
Source: Forexoma.com
The answer lies in interpretation. The numbers don’t lie, but your mind does. Your hopes and fears can make you see things that just aren’t there.
When it comes to trading on the Forex market, winning is a matter of the mind rather than mind over matter. Any trader who’s been in the game for any length of time will vouch for the fact that psychology has a lot to do with both your own performance on the trading floor and with the way that the market is moving.
When we say, trading psychology is about how well you as a Forex trader know yourself, your strengths, and your weaknesses. It’s about how well can you put your strength to good use, and control your weak points. This decides how successful you will be.
When you know yourself, and are aware of how you will react under certain market conditions, and what you will do to protect yourself from self-damaging decisions, you make the most of ever changing currency market environment.
The overlapping line between trading and psychology is very fine and therefore complex. Psychological factors, like performance anxiety do come in the way while a trader is trying to make a decision in the market irrespective of how clear headed he might be.
In the same manner poor trading practices, like taking on too much risk with big lot sizes, can increase the normal stresses of the marketplace. I have personally seen many traders put their money at risk without giving it much thought and analyzing the market condition wisely. Such situations repeating themselves can frustrate a trader. And then there are grounded traders who base their trades on solid methods, but these may not be suitable for their talents, and skills they possess. There is also another aspect to it. A certain type of trade may not go down well with a certain type of trader. For example, a very short-term, aggressive method of scalping markets, for instance, may look encouraging in theory but may prove to be completely irrelevant and stressful with a person who is highly analytical and risk-averse type. Aggressive trading can be a disaster for someone who plays safe bets.
Then there are instances when trading psychology issues have little to do with trading. These problems are the results of some already existing problems that may not be solved by different trading methods. These problems can be dealt with some simple suggestions and tips that can help an individual understand and acknowledge the anxiety and then learn to control emotions and build discipline.
If you have read enough about trading psychology and think that information overflow might kill you, here is a capsule! Understand ONE simple thing – That your biggest enemy when you are trading is YOU. It’s not the market, or the market makers, or breaking economic and other world events. If YOU do not have a professional psychology then you will make the wrong decisions and lose money and there is no stopping and getting away from being a consistent loser. So let us discuss some keywords, and concepts that will help you to work with a professional trading psychology.
Be Disciplined. The problem with most traders is that they treat trade and window shopping on same scale. In simple language a trader should have a well chalked out plan with clear stop and limit levels, and he should make sure that his analysis takes the expected downside as well as the expected upside into account.
A wise trader will not let excitement, fear, or someone else’s influence make him decide what to trade, enter or exit a position unless he himself/herself sees sense in it.
An experienced trader understands that there are times when it’s better to be in an all cash position and watching the market from the sidelines.
Currency pairs are not your friends. Your friend is your trading psychology. So do not play favorites with currency pairs. Focus on the technical aspects and do the right thing based upon your own system that you have developed and learnt over time.
To be in the game and yet remain emotionally detached from the market and the excitement that its movement creates is another trait a trader should try to imbibe in his trading personality. Don’t go on checking the prices all day long. Prices are not important for a trader. Signals are. So wait for the signals and do not let your mind be engaged with one extra thing that has no importance. It’s a better idea to stay focused on the large trends and not try to react to every move that market makes or every news that market breaks.
A trader has to learn to understand these events and be prepared for them, and be able to take the appropriate actions. A good psychology takes into consideration that you cannot predict what is going to happen in the market.
One last important tip for you to keep at the top of your mind, make sure you are only increasing your position when prices move toward your targets (of course if you really want to add to your position). I have seen it many times that when a price starts to move it usually continues in that direction for some time. So do not add to your wrong positions with this hope that you recover the losses when the market turns around.
Knowing the above things is something that makes you a profitable trader. Do not look for trading systems and sophisticated indicators or robots. They don’t work. If you still lose, it is because of yourself, not your trading system or the market. Understand and learn that trading doesn’t mean clicking on the buy or sell buttons. Everybody, even a 4 years kid is able to do that. Discipline and patience is the key. Waiting for the right and strong trade setup is something that makes you a profitable trader, not taking several positions per day. Setting proper stop loss orders is something that saves your capital and helps you keep on trading and making money. Taking too much risk with wide or no stop loss orders can only wipe out your account and prevent you from trading.
Source: Forexoma.com
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