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How psychology determines success on Forex?
Written by: PaxForex analytics dept - Friday, 21 October 2016 0 comments
Strategy, discipline, and attitude with which you approach the realization of trading deals on the Forex, determines your final profit or loss in the long term.
You can not control the ups and downs of price movements in the currency market. In this regard, many people believe that success or failure in forex trading is only a matter of luck or whim of fate.
Five per cent of the successful traders understand that the remaining 95% not aware: that chance is just one element of the market. Your psychology defines how do you deal with a myriad of random events and probability of choosing patterns. It is this psychological aspect creates a real difference between a profitable and unprofitable trading.
The first rule of trading psychology says: "Get organized". This applies to any success in business, and it is extremely important on Forex, with its high volatility. What does the organization in the performance of trading means on the foreign exchange market? It’s a detailed maintenance of records and notes relating to each trading deal that you make.
Admit in notes what currency you bought and sold, as well as the date, time, price, amount of profit or loss. Make notes to yourself about why you implement a particular transaction, which strategy or technique was used.
Write down all at once after the deal is made and the details are still fresh in the memory. At the end of each week, you should re-read your notes. What would you change? What works or fails? Should you make some changes?
The second psychological rule recommends considering your trading with a minimal risk. It’s threshold depend on your risk tolerance, but you should never risk more than two to five percent of the total forex account balance per trade. If you have a balance of $ 20.000, you should not risk more than $ 400-$ 1.000 in one trade.
The losses will inevitably occur because the market is extremely volatile. Therefore, the amount at risk should be reasonable. If you consistently make a profit for a long time, your amount will increase even at moderate risk values.
The last rule is: "You must have a disciplined technique and understand all its aspects." You need to know where, in accordance with a method, to place stop-loss orders, when to take profits, and so on. Completely eliminate the emotions from your trading, and always follow the cold technique without changing it because of fear or greed.
Once you prove to yourself that you masterfully learned two or more methods, you can try to mix them. Do not use a lot of techniques. Two or three is more than enough.