Traders need a lot of skills to succeed. These include understanding of basic trading principles, technical and fundamental analysis, markets, etc. The correct psychology of foreign exchange trading is one of them.
Although this is not a real academic study, it is actually the process that many traders go through when they start trading on foreign exchange trading platforms , develop trading strategies and try to gain trading advantages. Managing emotions and maintaining clear discipline in trading is a much-needed skill.
It takes a certain amount of thought to exist, especially when you enter and leave positions, up and down profits, you are forced to make quick decisions. Stick to your initial trading plan and don’t disagree when you are in a losing streak, so you can control your emotions and make methodical choices. Leave your feelings at the door! However, as a trader, you will experience important emotional factors that arise when trading.
Emotions in trading usually lead to misjudgments and losses. These are the most common feelings of traders :
Understanding the element of fear when you are afraid of trading may be the first emotion you experience when looking at the trading chart. You cannot understand it. The code and information, this is a terrible concept. You may want to run to the hills, or even not invest just for safety, but you will lose potential gains. Without the correct calculation of risk, fear may be the limiting factor for not opening potential profitable positions. Understanding what fear is will be the first step in overcoming emotions and the shortcomings you may encounter when entering into something you don’t understand. Trading is not a threat. There is almost nothing to worry about when trading. It only takes time and knowledge to understand what you are doing, why you are doing it and how it ultimately benefits you.
Greed Greed may be your worst enemy, know when to tell it to quit and get your profits. Traders who have experienced some kind of market risk will know that when things go well, they want to maintain every last minute. Due to the rapid changes in the market, this mode of thinking can lead to account destruction. Overcoming difficulties is not easy, but overcoming greed will be even more difficult, because you need to know when to exit and enjoy what you have achieved when you profit from trading. You need to quickly recognize feelings of greed, decide that you don’t have to “do a little more”, and stick to your trade plan that has been based on rationalized preliminary decisions. Greed can lead to over-trading. This situation is much like gambling addiction and needs to be avoided.
In foreign exchange trading , hope is a rather useless emotion, even if all traders experience the feeling of hope, no matter how expensive it is. Being an optimistic trader is necessary, but it needs to be controlled, because positive and positive tendencies also require reality checks when trading online. Traders often fall into the trading trap, that is, if they give more time, the market will adjust and save their trading positions. This is a textbook example of a wrong trading method.
As fear turns into panic, anger may cause traders to feel regret for missing good trades. He may try to enter the same “missed” trade because he entered too late and caused a loss, hoping to make a profit. Although you may also feel excited and regretted because of emotions, these will make you feel dangerous during the decision-making process. After a series of losing trades, regret can become a factor of losing motivation, which can lead to frustration and the end of a trading career. The solution is to maintain your trading discipline and trading judgment, which is what successful traders do and the direction you should strive for.
Understand your mental state, dominant emotions, reactions and boundaries, and obey discipline every time you enter a transaction. Risk tolerance is an important factor when trading, and it mainly defines your decision-making process when trading. Risk tolerance is essentially the degree of risk of each investment you are willing to bear.
Realistic understanding of the market, risk-reward ratio and the decisions you need to make will affect your tolerance for risk. Another factor that needs to be considered risk tolerance is, if the market is not good for you, then what is the amount you will lose.
Managing your emotions when trading is a mature and important method. When the position suddenly turns to you, the transaction becomes very tense. Many traders make irrational or “immediate” decisions, which often result in traders at a disadvantage.
Emotional reactions are usually the product of bad trades, and informed decisions reflect good trades. Since most experienced traders prefer to make a planned decision for each trade, rather than relying on spontaneous decisions that may eliminate the entire trading life, they turn to practice.