Psychology Mistakes in a Trading Environment

Forex traders often jump into the scene without fully understanding the psychology behind making moves. This can lead to a lack of confidence, which stifles even the best trades. These traders don’t realize the importance of trading psychology until it’s too late and they’re either devastated or they’ve depleted their funds. Here are some of the important rules of forex to take into account, and not to slide the uncomfortable feelings that might come from a trade under the rug.

Realize the Importance of Trading Psychology Upfront

Successful traders already know that trading psychology is part of the forex game. Anyone who’s serious in becoming a good trader must take the time to understand and master the mentality that leads to trading correctly. Getting in there and making trades is not what it’s all about. It’s not only the setup that is vital to good decisions, but it’s also understanding how to manage money and what type of mentality you need to maintain throughout. The first step in overcoming mental barriers is understanding they exist and then realizing they’re importance. Begin to research and understand trading mentality upfront, so you can progress without psychological hindrances.

Once you understand the mental and emotional factors going in and out of trades, you’ll also know that you can’t fully control them. That stands to reason, since in actuality, every trade you make represents a risk. But understanding emotional mechanisms that are part of our being can help keep them under control. It’s ok to be anxious and even afraid, but keep in mind that these uncomfortable feelings come and go. They don’t last, so at some point just learn to swing with them without being controlled by them. Keep your focus on what the market is doing, not on every feeling that might arise. Keep your composure and stick with your initial setup to make profitable moves.

Don’t Be Driven By the Excitement of Market Moves

All traders must learn to keep their emotions at bay if they want to continue in the game long enough to become experienced and profitable. This means putting common sense to work before emotions. When there is a new release of important economical data, or some big news story that interrupts regularly scheduled programming, don’t run to the computer and wildly make trades expecting everyone to follow. No. That’s not how it works. As a trader, you want to follow trends and not rush into the market blindly, on your own expectations of what might happen next. Learn to wait for others to make a move. Watch and see if there is really going to be a move in the market. Just because you “feel” that a huge move is coming is not a reason to jump in. Wait for the market to show you what it’s going to do and how it will react. Worried that you’ll miss the boat? Maybe, but it’s not a chance you should take. Stick with your plan – if it’s wrong you can tweak it, but don’t change it due to being overly greedy.