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Should we trade under emotions?
Written by: PaxForex analytics dept - Friday, 27 June 2014 0 comments
Trading in the forex market or any of the other financial markets under emotions is one of the biggest enemies of any trader. Forex traders are facing different kind of emotions during their trades. The main problem is that whether a trade goes for you or against you it can affect your emotions in a profound way and this can lead you to behave in an erratic fashion which means making unreasonable decisions.
Even if you have set down a specific trading strategy that you plan to stick to it can be hard to execute when you are overwhelmed with emotion. By the same token you shouldn’t let losses send you into a panic either. A few losses in a row can make you feel like everything is going terribly wrong and this could lead you to make poor decisions or even give up trading altogether.
Forex traders should know that most successful trading plans make provision for losses and even if you lose out on a few trades it shouldn’t affect your forex trading. Stress affects a trader's profit and loss in a number of different ways and the exact
manifestation will be different for each trader. For some traders stress might cause them to trade more than usual desperately to make profits while some traders will trade less because they are scared to make any decision.
Greed is also one of the biggest enemies of forex traders. It is perhaps natural that most of forex traders are money-oriented, profit seeking individuals who attach great importance to financial success; if someone is motivated by money it usually follows that they are materialistic and have a tendency to obtain as much fortune as possible for them.
To deal with the problems associated with trading psychology we must minimize the role of emotions in our trade decisions; to minimize the role of emotions we must understand that success or failure are not related to luck, but are the logical consequences of our own choices. Controlling your emotions is vital in terms of executing the rules of your trading strategy with discipline.