Commercial psychology in forex trading needs to be mastered to succeed.
Success in trading is not only about knowing and understanding the fundamentals or technical analysis but commercial psychology plays a vital role in the success or failure of our trading.
When we say business psychology, it means our individual psychological qualities as well as the understanding of collective psychology. This lesson is all about the important psychological factor for a trader who can lead to great successes or greater failures.
Trading is an art in itself. Even with great knowledge and understanding of the market, you may find yourself losing a constant in your trades. Psychological factors play one of the most important parts in circulation. It can literally make or break you. These all stem from two BIG - fear and greed.
Let's take a hypothetical case - and mind you, in practical life and you will see it happen so often.
You can take a long position for EUR / USD and instead of going up the price goes down and up your stop loss. Your trade ends in loss and you are sad.
But you are still sure that this may be a temporary correction and prices should move upwards. However, now that you are afraid to take another position, you have to wait and think.
Suddenly the price reverses and jumps very high, just as you have analyzed. You are now frustrated by the loss of a second chance to offset your initial losses. Now you feel very frustrated and angry ... and yes, desperate.
Fed with the anger and frustration that enter the market for a much larger buyout to offset the previous loss and missed opportunity. To make things worse, you can put your stop loss order too far in case the market behaves again as it did the first time.
Prices have already moved very little, once you entered a purchase deal, the market goes for a free fall. And sorry !!! The position was much larger and the stop loss order was too far. What remains is a very large hole in the pocket and VERY, very angry, frustrated, also you are afraid.
Let's check out everything that can go against you in your trading career and all you need to keep in check:
Greed - No one becomes rich among the night as you have already seen in "Forex Profits - Take Fools Off". Do not trade all the time even when you are not too sure of the price direction and do not take too much risk and lots of.
Fear - a couple of losses and we come very cautious so that miss the opportunities that otherwise we are very confident.
A passionate connection with your positions - A trade can always go against you If you emotionally attached your trade you may decide to comment on it. Get out of any trade that is really being against you as soon as possible.
Ego-feeling "I know everything, and my decision was correct." Even if a trade is going against you.
Too much optimism or pessimism - said a trader has to take risks and success depends on the ability to take risks, but "how much" is the thing that can decide whether your mutations or you get doomed. A perfect balance is needed between optimism and caution.
Rebel nature: This kind of characters always try to go against the trend. They are rebellious, right? Remember the saying that trend can be your friend. Accept it. A trend is always reversed but taking a position along the direction will always be less risky.
This was just an example of how correct analysis, knowledge and thought become completely useless due to psychological factors and lack of discipline in trading processes. .
Discipline in trading
Whatever our psychological qualities we have, sometimes, make some common mistakes. A strict control to avoid these to repeat what is discipline in all trading operations.Training in trading in Forex trading is more important than knowledge. Doing discipline in our trading profession is the most important aspect and the cornerstone of success. Let's check what factors need attention to improve trading discipline:
Manage sound risks all the time
Risk management comes in the image for size, leverage and always put optimal stop loss orders.
Trade only when you see a strong opportunity
Do not trade for trading. You do not have to be in the market all the time. Trade only when you are very confident about the position, assessment and risk ratios and returns.
Do not mess with all currency pairs
Trade only a few selected currency pairs as each currency pair has its own character and with time you can start getting a feel of it. It is best to have the devil know who is known.
Do not change too often
Whether it is a trading system, trading approach, position size or risk reward ratio - be consistent. Frequent testing and changes only increase uncertainty and uncertainty is the number one enemy of the dealer.
The bottom line is that strict discipline is a necessity to conduct successful trades and the first step to achieve this is to understand our personal and psychological traits.
