Nothing can aid you more as a trader than forex trading psychology. Emotions are there to influence your activity, but they do not have to compromise all your thinking processes; this is why what is happening inside your mind, regardless of how good or bad you are doing, can be enhanced.
Burial of the ego (sticking to profitable trades), avoiding the bad market conditions explained earlier and above all coming up with a trading plan can help all of us cope better with the emotional side of trading Forex.
Know Your Limits
Because those emotions – fear, but also greed – can interfere with the way in which you make trading decisions, and induce you to make hasty, knee-jerk or impulsive trades. If you’re aware of your key triggers, then you ought to be able to manage them more effectively. For example, if you’re impatient after a bad losing streak you might engage in a round of revenge trading which counteracts your plan entirely, leading to even bigger losses. Or you might engage in reckless aggressive trading after seeing some huge winning streaks, overconfident in your ability to consistently decipher price action. Journal your emotions after every trade until you can begin to ward off impulsive reactions to triggers from your subconscious mind. Such an approach will steadily cultivate more conscious awareness of those triggers while also building more discipline into your decision-making process. When the dust settles, it will be easier to make absolute numerical calculations and trade in a more consistent manner.
Know Your Emotions
Specifically, the traders’ subjective feelings, such as fear, euphoria or despondence may induce irrational decision-making and thus impair trading performance. Not knowing when and why you’re prone to getting upset will make it harder to identify the minefields of your trading strategy. For example, a fear of loss can lead to ‘revenge trading’ – that is, taking trades that are larger than you have any business taking, trying to recoup prior losses by taking bigger loss. At this point, you’re providing fuel for your own fiery demise. Traders could use techniques such as mindfulness meditation and journaling to become more aware of, and to better manage, their emotions; positive self-talk in maximising the confidence one holds; and breaks to restore energy and regain perspective. Finally, peer support could also be another way of building emotional resilience – all of which could help traders develop an approach to markets based on a strategy of ensuring success.
Develop a Trading
Plan It has been said that anyone trading for a period of time, whether professionally or recreationally, will learn that in order to succeed, you must have a plan. A trading plan might consist of an analysis of chart context combined with identification of trading setups and definition of parameters such as stop losses/profit targets. Emotional triggers such as fear, anger, impatience and greed can easily skew a trader’s perception and leave him open to making mistakes that are often more the result of emotional haste than sound judgment. There is also no way of keeping these thoughts conscious after the moment of emotional takeover; so you cannot manage them. A crucial part of your trading plan is your ‘why’. It is essential to ask yourself the question ‘Why do I want to make money?’ Be honest with yourself. Then write it down.
Surround Yourself with Like-Minded Individuals
To ensure this, surround yourself with a group who will celebrate your victories, and console and support you in your failures. Or, to secure a similar outcome, conduct a thorough post-trade analysis, or seek support from a coach or a close affiliate. Avoid quitting. Instead, you will always have a chance to elevate your performance the next time. This might be difficult, but it will lead you to your goals – higher up the performance ladder – faster. When your feelings of fear or greed captivate you, cultivate discipline through routine – by journaling, taking a break, or even changing location. Finally, remember that it is your emotions that tend to lead you astray when trading, so once you are in the zone and trading with concentration, practicing your ability to control your emotions will improve your odds of success. These tips should help reign in your emotions and make good decisions, no matter what happens – good luck!
Exercise a Different Part of Your Brain
Trading psychology is another integral part of trading that can influence decision-making and trading performance, where emotional responses can be triggered by win-loss feedbacks and market volatility, and when a trader feels euphoria upon making winning trades or fear in missing the train of potential gains. Use mindfulness techniques such as deep breathing and meditation to maintain equanimity in times of market turbulence. This will also help you to stay focused on your objectives, avoid emotionally driven mistakes that could result in losses, and make more objective appraisals and decisions in relation to the markets.
