Trading psychology is a critical aspect of achieving success in the forex market. It deals with the emotional condition of a trader when entering and exiting trades, looking for potential trade opportunities, or carrying out other trading-related tasks. Usually, most traders experience losses because of negative emotions that poison their rational decision-making processes and cause them to make improperly planned trade decisions. We, as humans, are innately emotional creatures, something which dictates our judgments. We tend to elevate our egos when making decisions or make outbursts when we think things are not working right.
Trading the forex markets takes hard work, discipline, a plan, and the right personality to be profitable. You will be tested consistently and this will require a psychological mindset, which allows you to make the right decision when the going gets tough. To become a successful trader, you need to keep your emotions in check and have trader discipline. This will help you build confidence and allow you to execute your trading plan more effectively.
The amount of monetary loss sustained by a new trader during his or her introduction into the marketplace can vary wildly and is ultimately dependent upon how much capital is at the trader’s disposal. In addition, reckless implementation of leverage by an inexperienced trader can rapidly turn a manageable drawdown into catastrophe. While it’s true that active trading produces many more losers than winners, the possibility of success does exist. Personal anecdotes of financial gain, the impressive track records of famous investors and profiles of day traders who took small amounts of venture capital and subsequently built fast fortunes are easily found through some basic research of the trading industry.
If you are trying to double your balance every month (or every week!), chances are you are just going to lose your balance. The worst part is, you will probably double your balance a few times before you lose and that will make the inevitable major loss all the more painful! The key to successful, sustainable and profitable forex trading is sound risk management and realistic expectations. Keeping a cool head and sticking to your money management rules during a losing period can be incredibly tough, but as long as you stick to your winning strategy, it’s actually impossible to lose.
Mental states are primarily what most people call discipline or emotional control. Examples include: being impatient with the markets, being afraid of the markets or being too optimistic about the markets. Controlling your mental states is just part of the answer, but when you can see that you are the creator of your own results as a trader, then you have come a long way and can really make progress. One of the most effective ways of achieving an optimal mental state when trading is by acquiring the knowledge and skills in ‘Losing Properly’.