Forex trading is an activity that not every people can manage to do successfully. It requires decent education, knowledge, intuition and luck to accomplish great things in Forex and even then, it could take years before you earn a good amount of money.
Forex has a lot of interesting features and characteristics. Psychology is one of the most important principles, which in most cases becomes the reason for making mistakes while trading on the Forex currency market. Why is this happening, what to do to keep calm during trading? We will consider the following feature in more detail below.
Before trading on the foreign exchange market, you need to study detailed information on this matter. This approach will help you make the right decisions. Often a trader has a variety of negative emotions that have a strong impact on a person. In particular, the following factors should be attributed to them:
- Greed – Everyone wants to make the greatest possible profit.
- Excitement – A negative emotion that deprives a person of common sense directs attention to quick income.
- Fear of losing potential profits.
- The hope of making a profit provokes not to trade on the market, but to play the lottery, guessing the possible outcome.
Of course, these feelings cannot be changed in any way, because they are inherent in every person. However, we can easily deal with and control them. To do this, it is necessary to study the psychology of a trader’s behavior during the opening or closing of transactions.
Trading Software and Psychology
One of the most important moments that a lot of traders tend to neglect is the case of trading software. The latter is closely connected with psychology because under the influence that software can do everything instead of humans, people are sometimes deceived and they make mistakes. Of course, trading software is helpful and robots can do a lot of useful things but traders need to be alert.
One of the best examples is elliott wave software which is used frequently by traders for technical analysis. This is an excellent piece of software that can make the job easier for you but proper psychology and approach is necessary to use it correctly.
Details to Consider
Under the influence of all the emotions presented above, the following basic prejudices develop in a person:
It is often difficult for people to admit that they have made possible mistakes, and this is all due to the fact that we are self-centered. Psychology is vital in trading. We want to prove to others that we can do something better than them. However, most often this leads to severe losses. When the price moves in the opposite direction, it becomes difficult to close with a small minus, which does not turn into an even larger one over time. Therefore, the way out of this situation is to allow yourself to make mistakes. It is better to let the loss be small than it will come to strong losses.
This concerns the transfer of yesterday’s market situation to today’s one. Do not get hung up on one instrument price, but build your forecasts based on the current situation. The levels of the past days serve you only as an analysis, and not in any way for trading.
Fear of losses
This effect is built on the importance of losing what is now, and not what may be later. When a trader sees a small downward movement, he immediately closes the position. And this interferes with truly effective trading.
Therefore, so that emotions do not affect you, adhere to the following rules:
- take your time when making deals;
- follow your trading rules;
- don’t be influenced by the crowd;
- always be calm;
- improve your knowledge.
Also, do not trade in anxiety, fatigue, or frustration. The trade should be done with your rules and plan in mind. Then you will only have good deals that will bring positive emotions. It is important to learn how to remove all emotions at the beginning of the path, because the further, the more difficult it will be to take steps.
The proposed contracts or financial instruments are high-risk and may lead to the loss of the deposited funds in full. Before making transactions, you should familiarize yourself with the risks with which they are associated.