Trading Psychology
Psychological preparation is very important when you want to reach good
stable results. The beginner, who has just started the trading process,
quite often considers Forex as something that is easy to learn, but this
is not true. Having earned a small sum in the beginning, he loses his
head and as a result can loose absolutely everything. During the first
days of trading, you can start writing down all the actions made by you.
In a little while, you might notice that there is not that much profit.
You can start analyzing your trading strategy and notice at once that
it is not that bad, but then you draw your attention to the comments:
"closed too early", "kept position open for too long", etc. The reasons
of such situations are unpreparedness and lack of confidence. Almost
every trader who has made at least a dozen deals, will agree that
self-discipline, control over emotions and the ability to make adequate
decisions are vitally important trading conditions.
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It is much better to use energy, spent on unnecessary emotions on learning new strategies and enjoyable moments of life.
There are too many nuances on the market, which cannot be predicted. If
you knew everything, you would be a perfect trading machine. Because it
is very important to understand that people are imperfect, it is
necessary to cope with the psychological state that can only disturb.
While trading on the Forex market, you stick to your own or borrowed
strategy. You place the order, and then you see that everything does not
go the way you planned. A majority starts to panic and close orders to
reduce possible losses, thus changing trading strategy. However, as soon
as the order is closed, you see that the graph moves in the desired
direction, but the moment is lost. This situation is an example of
psychological instability. When tiny changes are not in your favor and
you are ready to escape. Only three results are possible during the
trading process: profit, loss or zero result. Of the three possible
situations, only one brings positive emotions, whereas the other two
are soaked with negative emotions. However, if you respond on every
negative result with panic, annoyance and fear, very soon, there will be
no energy for trading. You must learn to control yourself and your
emotions and not consider every failure as the end. Trading should
benefit not only money, but also the joy of the process. It is much
better to use energy, spent on unnecessary emotions on learning new
strategies and enjoying moments of life.
Leverage can play cruel joke on traders. The effect of leverage allows
you to trade larger amounts of money than you invest. However, leverage
can either work on your side or against you. Some traders choose a big
size of leverage to operate bigger sums. It creates the illusion of
"unlimited opportunities without any risk", but actually it is not
always like that. A big volume of traded funds may bring great profit
because of the leverage, but never forget that along with income, there
is a big possibility to lose almost all deposits. Experienced traders
advise to carefully analyze and choose the size of the leverage that
will help you avoid a high level of risk.
It is possible to indicate three main phenomena of the work on the
market: greed, hope and fear. Each trader has his own reaction on every
emotion previously mentioned, but these emotions have one thing in
common - in excess they do not let you make correct decisions. Greed
must be tempered, hope - justified and fear motivating. Only under these
conditions the emotions would not harm, they will help.
Trading psychology is a very important discipline, which must be studied
by every trader, who counts on long-term work on the currency market.
Stress is the main newbie's enemy. People act differently when in a
stressful situation. Someone gives up and does not want to fix anything,
whereas someone decisively saves the situation. Trading on the Forex
market is second, after sapper, most stressful profession in the world.
However, if you know the core of the problem, you can solve it. It is
extremely important to study stress management skills. The sources of
stress can be different: from loss of several pips, to the attitude of
your spouse towards your work. External factors will always follow you,
but you can change your attitude toward them. The biggest enemy you
struggle with, is you.
While working on the Forex market, you need confidence, concentration,
practice and persistence. After all, not absolutely everything depends
on trading systems and chosen strategies. It is quite hard to work and
overcome difficulties by yourself, but it will help you in trading and
it will become one of the main factors of success. Trading psychology
is a very important discipline, which must be studied by every trader,
who counts on long-term work on the currency market.