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Why you shouldn’t trade forex with emotions
Written by: PaxForex analytics dept - Thursday, 12 January 2017 0 comments
The psychological aspect of trading is extremely important. When it comes to trading, the general consensus is that we should be able to control our emotions in order to succeed. We shouldn’t be greedy, fearful, impatient or easily disappointed because we may not trade objectively. Therefore, the only thing that seems reasonable is to try hard in order to eliminate emotions.
Emotions are part of human nature. They may manifest as positive or negative feelings. Since a trader is first of all a human being, emotions can interfere during the trading. It is essential to learn how to handle them to prevent they constitute an obstacle to your success. The trader has feelings of fear, greed, self-destruction, etc. Understanding how to manage these emotions is the key to achieving good profits. It is essential to learn to overcome failure, have a profound self-control and work with tenacity. The disappointments should not be an obstacle to your work.
Certainty in an executed trading idea is often a guise for greed and fear. As a trader, it is important to have a plan which focuses on entry triggers, trade size, and risk to reward ratios so that you’re acting in a mechanical manner. However, you should also be willing to exit your trade or accept the fact that
moving forces in the markets can change quickly so you can avoid the painful experience of holding on to and closing out larger losses than winners.
Why emotions drive the market, its not the news events the banks the props firms or the fundamentals but the actions from every participant in the market that drives it. It is how we interpret the news or the charts if its green then buyers come on if its red then they sell and so on. We use our technical analysis to provide us with reason for entry. If you can learn to keep your emotions under control and don't let them control you while trading you will see a massive increase in your trading.
The ability to control your emotions and maintain discipline is the most important thing you can do. A trader must learn to contend with market challenges of individuals and the crowd psychology in order to progress from a novice to an expert. If you want to turn a profit when investing in different asset classes, such as currencies, indices, equities, commodities, or bonds, you have to understand that trading is primarily a game of psychology. Only the toughest players survive it. The real edge separating professional traders (those who make a living from trading) from failed traders is clearly their mental approach to the market.