Psychology matters most!

hi guys,

I'm a newbie trader running a tight ship thru fx waters,
and find that a good balanced psyche in trading matter most even with a plain system, one can get consistent results.

Is this true?Please post your comments,

Yes that's true. Money management and psychology is essential for trading.

Tech and Fundamental analysis give you opportunity to predict more than 70% of moves, but withought good money management and psychology this 30% losing trades will kill you.

I just found out now. Is this true? I am very curious about your experience.

The Forex Trading Psychology: What One Should Remember

Why do many traders lose?
I can bet you have heard that most newbies blow their accounts while trading on Forex. Such people often say that they were scammed, that someone has stolen their money, but they never blame themselves. But their main problem is the wrong attitude to the Forex trading itself. I have met dozens of beginners who suffer from their own unrealistic expectations. They expect that the Forex trading will make them rich, that they will make $100000 from $1000. This means that their thought will never be the same to the reality. Even experts say that making 10% of the initial depo in a year is a great result, and not everyone is able to achieve it. So, what do you think, will one be able to turn a thousand of dollars into 100 thousand in a couple of months without any proper experience? It is doubtful!

The cause for losing money is the idea that a trader needs to make money and achieve success. Such the emotional state makes them open new deals nearly every minute, without any analysis, and without following the trading plan.

Remember, that you don’t need to open deals because you feel you have to. Do it only after you get reliable signals.

What emotions should Forex traders watch?
When trading Forex, you can feel a great variety of emotional states. The big question is: ‘What are they? How can we define such states and avoid them?’ I hope my further explanation could help you!

Greed: the most common feeling
Most traders who have just began their Forex journey want to make more money and wait until their trade will go on further and bring them a great win. However, it rarely leads to successful trading as trends may be volatile and can change their movements very often. Risking too many lots per one trade is the next mistake that traders make due to greed. If you have attended some trading courses or read books with the Forex basics, you may know that it is always better to risk not more than 2% of your capital. Some people on forums (I’ve met such posts by myself) say that these are fairy tales for beginners, but I personally don’t see anything wrong with this rule. It helps to control your greed and save your funds in case of a losing trade.

Fear of entering the market and exiting from it
I can say that this one is natural for people who take the first steps into the Forex world and haven’t mastered a certain strategy. If you are sure that there are signals for opening or closing a deal, you would do it without hesitation. This emotion can also come to you after a losing trade, especially if you have lost more money than you could afford. It is a natural feeling for traders. How to manage such situations? Treat the market with logic, always analyze its technical patterns and make sure you don’t risk too much. You won’t fear anything if you’ll find the trend and know that your funds will be safe in case of a losing deal.

The desire for revenge
Traders often want revenge when they were planning that a deal would work out, but this didn’t happen. The best advice here will be to remember that Forex is an unpredictable market and there are no sure ways to win on it. Once you start, you should keep in mind that your deal may reach the stop loss level even if you planned it well. This happens and it is normal for the market you work with. It is in its nature! If you still want revenge the market, just imagine how much can you lose while doing that. Do you need it? Better turn your trading terminal off, think what was wrong in your trading, develop your trading system, read an article about the trading psychology or even drink some tea! And just after you have calmed down, get back to work!

Feeling euphoria after closing winning trades
I bet that many traders are enjoying this feeling. I know that as I enjoy it by myself. Nevertheless, this feeling can cause certain problems too. People may become over-confident and risky because of the euphoria. Of course, you can wish to enter the market just after you have closed a couple of successful deals, but there are no guarantees that it will work the same way. I recommend you being cautious and opening deals only after finding strong signals for that.

How to create an efficient Forex trading mindset?
The best way to become a successful trader who will earn money on Forex for sure, try to create the proper understanding of psychology. It may be hard and you will need to take efforts to learn to control your emotions. The good news is that it’s not so difficult as it may seem for the first time.

Just accept certain facts about the Forex market as inevitable normal things. You may keep in mind that trading can be profitable but not to those people who go ‘all in’ and risk a lot. Maybe, you should learn more about the long-term trading, by the way, you can read about this in my older posts!

The next most important point is mastering a trading strategy of your choice. If you understand how the market works, when it is better to enter it and exit from it, you will be more confident and enter it without fear.

Find out your risks for all the trades, another way your emotions will come and ruin your plans. Do it for every deal, and never place any of them before calculating your potential risks and profits. Forex is more about analysis and math, not the intuition.

Psychology is the solution to successful trading. Traders are absolutely their own worst enemies.

Psychology is everything in life, not just trading.. I suggest you read some books on the brain, its all very interesting and powerful.

Psychology is not limited to trading, one must first deal with psychology in life before even thinking of "trading psychology".

If you are in this trading business to earn money then you need to work on yourself first. No one who enters into trading without working on themselves will have a long term successful trading life. No one.

Think about this quote...

"More money only makes you more of who you are."

Mark Douglas's "Trading in the zone" is the bible of trading psychology. A must read!

Agreed. Psychology is the key factor for this industry. Working under pressure puts everyone where he or she deserves. I have to admit I am nor probable prepared for trading myself. I cannot stand pressure as firmly as it should. Sadly.

I was never an emotional trader but one day i found myself stuck and then i realized that it is essential to have a proper mindset and need to apply logic instead of getting carried away by emotions unnecessarily. So, i decided to build a proper trading strategies.

CarlosNorb posted a good explanation on this topic,

I would like to add some comment to the thread. Any psychology is an art of interaction. This is the interconnection of different mechanisms, behaviors and actions. The trader must understand the market and accept it. After all, if understanding comes, then any other feelings and emotions fade into the background.

This is the most important point, you must have an edge, No amount of psychology will help you if you haven't mastered your edge.

Someone said : "If you can't define your edge, you don't have one".

Agreed, to have an edge, practice the edge, and have confidence in it, it solves 90% of psychology arises.
Mostly emotions that spell fear and doubt arises from not having an edge and clarity of the markets.

The same has happened with me as well. Emotions overpower you when you are confused while trading and that happens when you do not plan beforehand. Sticking to a trading plan makes us more confident.

This is why; I use a list based of the parameters of my recommended entry point; when I find any missing point, usually I leave that opportunity!

Yes absolutely, your trading results are affected by your mindset. If you are patient and calm you will surely be able to close out a profitable deal. But if you are highly emotional and feelings like fear , greed , anxiousness are a common thing with you, then chances are high that you will lose out big in these markets. I would say you should rather avoid trading on a day when you are highly emotional.So an optimistic approach and a stable peaceful mind is the key to profitable trading.

Having an exit strategy that you can trust, no matter what happens, is a good way to overcome a lot of emotional issues. However, few traders have one, so most make up profit targets/stop losses and live with the anxiety of waiting to see if they are hit, and the disappointment of realizing they are clueless traders if price busts through their profit exit for much more money.

Unfortunately, it seems to me that about 95% of FF traders use support/resistance levels for trading, so since there is 0.00% mathematical probability in that strategy, it is simply guessing each and every time they enter the market. Since that strategy is promoted by big banks for the sole purpose of getting novices to put their money on those levels so the banks can use them to counter their trades, it quickly becomes an emotional roller coaster as one watches trade after trade lose.

If you can figure out how to stop trading fake price levels that are based on historical trades that no longer exist, and learn to measure the price cycles instead, then you can develop entries and exits based on the actual math of the current trading environment, which is all that actually matters, and trade with a calm smile instead of frantic hope. Good Luck.

Psychology is very important. For me discipline is the key to achieve anything in life and in trading.

Don’t freak out and you should assume that total responsibility for everything that is going to happen is on you.

Yes this is true and your edge is you! A huge advantage retail traders have is that they can choose NOT to trade.