The term "trading psychology" refers to the different facets of an individual's personality and behaviors that have an impact on their trading activities. When it comes to evaluating whether or not a trader will be successful, trading psychology can be just as essential as other factors like knowledge, experience, and competence. Forex psychology books can help new traders.
I've been a trader long enough to know most traders' thought processes. We can learn a lot from the differences between how losing and winning traders think.
I would lie if I said Forex market success depends just on the framework or system you utilize; it depends on your attitude, cognitive process, and response to the markets. Most Forex sites trying to sell a marker or robot-based trading framework won't tell you this because they insist you can make money in the markets simply by buying their product. Having a strong, non-confusing trading approach is important, but it's only one piece of the pie. If you don't deal with your trades and feelings appropriately, you won't make money in that mindset over time.
Why do most traders lose?
You've heard that most Forex traders lose money. This is because many individuals view trading negatively. Many people enter the business world with unrealistic expectations, like thinking they can turn $1,000 into $100,000 in a month. These false assumptions motivate traders to break trading records because they feel a "need" to bring in cash. When you trade with a "need" to make money, you trade inwardly, which is the quickest way to lose money.
What emotions should traders watch for while trading?
To clarify "deep" trading, we'll list the most common local trading mistakes:
Greed - A well-known business axiom says, "Bulls bring in cash, bears bring in cash, and pigs get butchered." If you're a "pig" in the markets, you'll likely lose money. Traders are voracious when they don't take benefits because they expect a transaction will last forever. You can add to your transactions if you do so for real cost activity based reasons, but doing so just because the market has moved in your favor is covetous. Gambling on a trade is also insatiable. Avarice can quickly wipe out your trading account, so beware.
Fear - New traders who haven't mastered a trading method like cost activity trading often enter the market out of fear (in which case they ought not be trading genuine cash yet at any rate). A trader can experience dread following a series of poor trades or a larger loss than they can sustain. To overcome market anxiety, never risk more money than you're willing to lose on a trade. If you're OK with losing your money, there's nothing to fear. Dread might make traders miss good trading opportunities.
Revenge - Traders need "vengeance" after a bad trade they were "sure" would work. Trading is never "certain" ever. Also, if you have gambled a lot of money on a transaction (seeing a theme here? ), and you lose it, you may need to try to make it back in the market, which can lead to another loss (and sometimes a bigger one) as you are just trading again.
Euphoria - While feeling euphoric is usually a good thing, it might hurt a trader's record following a big win or sequence of wins. Traders can become overconfident after winning a few deals on the lookout, therefore most have their worst losing periods afterward. It's tempting to jump back into the market after a "fantastic" trade arrangement or after 5 straight winning deals... There's a fine line between keeping your feet on the ground and thinking everything you do in business will succeed.
How to Improve Your Trading Psychology ?
1. Get Yourself in the Right Mindset
Before you start trading for the day, just remind yourself that the markets are always changing. There will be good days and bad days, but even the bad days will end.
Giving yourself time is another good way to improve your trading mentality. You won't make a lot of money on your first day of trading. You need to put in time and effort to make a trading plan that is rock solid and not affected by how the market feels.
Even though you can't completely get rid of emotions when trading, the goal is to limit how much your emotions affect how you trade.
2. Have a Great Knowledge Base
One of the best ways to improve your trading mind is to learn more about trading and get better at it. The best way to beat negative trading psychology is to know a lot about the stock market. Keep in mind that knowledge is power!
3. Don't forget that you're trading with real money.
It's easy to forget that the numbers on your screen represent real money when you trade online. There's nothing wrong with putting your money at risk in order to make money back. But remember to be careful and make better choices about how to invest.
4. Observe the Habits of Successful Traders
The stock market is different because it deals with each trader in a different way. When it comes to trading, you should know what your peers are doing, not to copy them but to learn from them.
By looking at the good traits of successful traders and adopting a few of their habits or strategies, you can make your own trading strategies much better.
5. Practice, Practice and more Practice!
Last but not least, the best and most reliable way to get stronger mentally is to practice. It helps you improve your trading mindset over time as you build trading strategies that you know how to use well and are ready for any ups or downs.
The process of both understanding and putting into practice trading psychology requires a lot of time. Over extended periods of time, you will need to consistently work on honing your trading mindset.