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Trading Forex With Right Psychology
Written by: PaxForex analytics dept - Thursday, 18 August 2016 0 comments
In recent years, scientists have begun to suspect that emotion plays an important role in evaluating risk and making decisions. We are told that forex traders are trained to evaluate risk and information quickly and reliably, and they often have large financial incentives riding on their decisions--which should cut down on bouts of non-rational behavior. Even so, earlier studies have suggested that many successful traders base their trades on intuition and feelings.
In the 1970s, two university behavioral science researchers, Daniel Kahneman and Amos Tversky, published a series of articles on judgment and decision making. Their research challenged what economists had long assumed to be true: that people act rationally when making decisions about money and finances. They discovered that people often make illogical decisions when attempting to manage risk. Their findings opened up a new area of study, behavioral finance that looks at the psychology of trading and the role emotions, thoughts, and behaviors have on our financial decisions.
Because the forex market is an extremely competitive environment, traders are constantly faced with challenges that will test the limits of their psychologies and skill in balancing the necessity to protect capital over taking advantage of previously recognized patterns. On top of gaining the basic knowledge of the market’s structure, the mechanical
skills of order sending, the ability to recognize patterns over a long period of time, and to manage risks, the market has built in to it the challenges of both individual and crowd psychology that a trader must learn to contend with as he progresses from novice to expert.
In order to excel at trading, you need to continue to study and learn. Because markets are always on the move, one must strive to be current on market activity. You will recognize patterns that repeat themselves. Moreover, because they do, the experienced trader will quickly act to use them as an opportunity to profit. You will also learn that patterns occasionally fail to follow through. How well the trader reacts to failed patterns is one of the key measures of trading excellence. Developing a solid “feel” for market movement should be among the first goals of the novice trader. This “feel” is gained with , hard work, determination, patience anddiscipline
Winning at trading has little to do with your system, trading equipment or internet speed. It comes down to can you accept full responsibility for your trading results. Do you accept the fact that the market gives you what you are willing to receive. Do you believe in the concept of probabilities and that you do not have to be right on every trade? The quest of finding the trading zone and staying in it never ends, so remember to have fun along the way.