The psychological aspect of trading better known as trading psychology is frequently ignored by a good number of currency traders. Because of this, these forex traders suffer from the psychological manipulation of the Fx market The reality is that the markets and currency prices are an expression of what fx traders are feeling.
As an example, whenever Foreign exchange traders are feeling doubtful a support or resistance level is created. The emotions that are felt by the market players define what currency prices will do next.
Trading psychology plays a vital position in Forex currency trading and understanding how your emotions and personality can affect your trading is necessary for success. In this section of my currency trading tips collection I would like to discuss 4 psychological threats that you should know about and that can prevent you from reaching your financial goals.
Greed:
Greed is one of the primary causes why Fx traders lose money. The fantastic measure of leverage in trading currencies allows Forex traders to produce very fast and large gains, but the same principle applies to losses. Just because you have great returns on investment in a few hours on a trade it does not mean you should expect it every single day. As a result, it is important to set reasonable expectations when you are managing your trading account.
Fear:
Fear is the emotion that tells us to not do things that we feel are way too risky. Fear is an emotion we need in our lives but when our degrees of fear are too high it may prevent us from doing things that are crucial. The main fear Forex traders face is the fear to lose money. This a typical fear since no one wants to lose money, but it is illogical if it doesn’t let a Forex trader take and manage his trades adequately.
For example, a trader might take a couple of losses and then be too nervous to take the following trades what could be profitable trades that could have covered the prior losses. This is an example of the side effects of fear.
Hesitation:
Hesitation is described as the lack of action because one is feeling skeptical or unsure. Currency trading can occasionally be extremely fast paced and a trader’s power to respond to the markets will affect their success and gains. Because of this, hesitating to take action and take advantage of the tremendous opportunities the market has to offer can be quite harmful to your trading career.
Ensuring that you never miss out on excellent trading opportunities because of hesitation can be easily done by just following a strict trading plan and using effective trading systems.
Uncertainty:
When you feel uncertain you just don’t know or have any idea of what is going on in the markets. This happens to all traders, nonetheless; not everybody responds exactly the same way. The truth of the matter is that uncertainty is an emotion that can make you make illogical decisions, and irrational decisions result in losses.
The very best piece of advice I can give you to fight uncertainty is that “when in doubt, stay out”. I have learned that whenever you are unsecure or uncertain about a trade you are more likely to lose money and commit mistakes.
Taking control of your trading career will require to also taking control of your emotions. The best way to take your emotions out of your trading is by using a trading plan, a good trading strategy, and concentrating on the process instead of on the profits. I'll be posting more currency trading tips and ideas on my upcoming articles.
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