Is There Such A Thing As Forex Psychology ?
The Forex market is a crowd of intelligent bankers, fund managers, multi million investors and amateur traders. Traders’ pros or the newbie read Forex news for forecast analysis and play the game of trading following the rules and protocols.
In most cases the experienced traders are always at the advantage side having the best experience and at the advantageous side while the newbie with limited experience are mostly at 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 actually lose but they cannot actually overcome their own psychology of Forex.
The “follow blindly” Forex psychology is one of the most common weaknesses of Forex traders. They tend to react fearless whenever there are breaking news and charts showing some movements. 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.
Definitely, following the trends is definitely 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 will have big impact on the trading prices. Most often, these data are false alarms and will put you in a losing position.
It is important that you have to overcome your eagerness to enter first. You have all the time to analyze what would be the impact of this breaking news and then you enter the trade.
Greediness is another Forex psychology character which traders have in common. That is why the Forex is the largest market in the whole world. In Forex trading you can easily have an annual profit of 10%-40% which is good already. But most of the time, these figures are not enough for traders. They want double or even triple profit which leads them to enter again the market and urging to earn profit again on the same day. But finally at the end of the day, they will end up losing at the end of the day.
As a trader, you should overcome greediness and learn to be satisfied with what you have. It is advisable to set a realistic target every day. For example, your target profit must be 50 to 100 pips. Upon reaching the target, stop and just relax and have a break. That’s good enough profit than losing more.
Forex trading is really not an easy business. It is complex which has a lot of factors which dictates the daily prices of the market value. In reality, a lot of traders are actually losing from the trading. You can never be sure that you will earn profit just by looking at the trends. Careful analysis and overcoming the negative Forex psychology is a good foundation for your trading. Exert a lot of effort in learning how Forex market works and have an in depth knowledge of the trends and enter trades in the right time.