Forex trading psychology is different for different traders based on the experience and stability one has in the forex market. The Forex market comprises intelligent bankers, fund managers, multi-million investors and amateur traders.
In the world of Forex Trading, there are three prominent personalities that you will come across in the beginning. These are the Forex Trader, the Forex Market Maker and the Forex Professional. When I first started Forex Trading, it was the end of the rainbow for me. There were times that I would lose a lot of money and other times that I would make a ton of money. But at the same time, there would always be a nagging feeling that something is wrong, that I am making too much or buying too low.
The funny thing is that my emotions did not stop me from getting into forex trading. However, they helped me find better ways to manage my emotions and make better decisions. For instance, when I was young, I used to get angry at the markets if things were not going my way. It seemed like everyone in the market was trying to rip me off or at least make me feel guilty for making bad decisions. So the key to improving your forex trading psychology is to change how you perceive these emotions.
So What Forex psychology actually does.
Your decision-making strategies are a direct result of your psychology. The same holds for trading forex. If you have a positive forex trading mindset, you will most likely do better than someone who does not. There is a widespread belief that the emotions of traders drive the markets. I do not doubt that this is true. However, the markets also run by technical indicators, which are nothing more than patterns in the market.
If you really want to become successful traders, you will need to apply some forex psychology. You will need to learn how to manage your emotions and apply the right decision-making strategies. By learning how to manage your emotions, you will see where your errors are coming from. After that take the necessary corrective action. Many traders get caught up in the emotion of anger and regretting a trade. This thing makes trader lose money because they did not use psychology to their advantage.
Let’s face it, and there are people on the trading floors that are emotional. Making decisions based on their emotions more than anything else. While this is not good for the markets, trading for those without any trading background seems like child’s play. It will be very difficult for new traders to learn how to make rash decisions when their emotional sensitivity has them focusing on every little drop and every little pore.
What is psychology of Experienced trader and inexperienced trader
When learning how to make decisions with your trading capital, you must apply psychological principles to your trades. You must realize how to manage your capital and limit your losses. While at the same time having sufficient capital to cover any losses that occur. This is the essence of Forex trading psychology. If you do not believe traders can do this, you may want to rethink the volume of trades you have performed recently or maybe even the number of times you have entered and exited the market. Trading with a psychological discipline is imperative to becoming a successful trader.
In most cases, the experienced traders are always on the advantage side, having the best experience. In comparison, the newbie with limited experience is mostly on the disadvantaged side. Sometimes new traders lose money because of Forex trading mistakes committed. They usually become sacrificial for the more experienced traders.
Forex traders who experience losses do not lose but cannot overcome Forex’s psychology.
Follow Blindly Forex psychology
The “follow blindly” Forex psychology is one of the most common weaknesses of Forex traders. They tend to react fearlessly whenever breaking news and charts show some movements. Also, they immediately rush to be the first to enter the market. They worry too much that others are profiting from the news while they are not.
Following the trends is the number one rule in Forex trading. But it does not mean that you have to be the first to enter the market when trends are changed.
Sometimes this breaking news does not dictate the forecast of the trading. You have to analyze carefully if it has a significant impact on the trading prices. These data are often false alarms and will put you in a losing position. It is essential to overcome your eagerness to enter first. You have all the time to analyze the impact of this breaking news and then enter the trade.
Greed- Another psychology
Another psychological factor that affects your profits and losses is called greed. Greed in Forex trading is often the downfall of traders because traders tend to buy a currency with a lower price than its actual value. They think that if they purchase it at a lower price. It will eventually go up in value and profit from this trade. While this is generally good practice, it is just as easy to lose a great deal of money from this move as well.
One way to overcome this problem is to learn how to apply psychological factors in your decision-making process. This is done by using proper risk management and proper planning. By being prepared and planning out your trades, you can increase your chances of making the right decisions and limiting your risks. These are two of the most important aspects of forex trading, and mastering these two coping strategies will significantly increase your chance for success.