If you want to be a successful forex trader, you need to know how to manage and eliminate your emotions in trading, and then make a series of plans to overcome these emotions. Today, we will analyze from various aspects how successful traders should master their emotions.
Why should traders manage Forex psychology?
FOMO (Fear of Missing Out)
Curb greed
Advice to avoid greed
How to have a successful trading mindset?
Grasp the bottom line
Why should traders manage Forex psychology?
What is trading psychology? In fact, trading psychology is only a technical term in a broad sense, but it covers the emotions and behaviors of traders, including excitement, impatience, anxiety, greed and fear, etc., and it takes time and process to master the environment and psychology.
Why is trading psychology important? Because it determines how traders react to its outcome, to fluctuating market sentiment. Unfortunately, most forex market participants have suffered far more negative psychological effects than positive ones due to financial losses. In fact, the forex market does not care about the emotions of traders, and those traders who can effectively manage the psychology of trading, both positive and negative, are best equipped to deal with the wild swings of the forex market.
The three most common reasons traders become their own worst enemies are the following: taking or doubling down on losing trades (when fear of losing turns into greed); Closing a position before reaching the target (fearing financial loss); Then there is the FOMO (the mood that turns to greed after a failed trade).
FOMO (Fear of Missing Out)
Conceptually, FOMO is the emotional state of blindly placing orders for fear of missing out on a trading opportunity, and I believe that most traders have experienced this. However, for traders, impatience, anxiety, impatience and other emotions can easily accelerate the occurrence of FOMO, especially the stress of the foreign exchange market and the rapidly changing environment further aggravate the depth of these emotions.
So, how can traders avoid FOMO? Here are four practical steps:
Make it a habit - Trading is often a single pursuit and can be lonely, putting traders in the mindset of FOMO. Try to eliminate distractions and focus on identifying key market points and appropriate trade entries to tune in to the external chatter. Avoiding social media, ungrateful attitudes and greed will help the process.
Focus on the present, think about the future - I believe that most people tend to focus on the negative side, regret that they did not take the opportunity, here the eye is trying to say that one deal does not mean that the next deal will fail. There are always more trading opportunities. So keep your mind in the present, but set your scope on the future goals of your trading.
Develop a trading plan - No trading plan is perfect, but a well-developed trading plan should cover most trading possibilities while helping traders invest with lower risk exposure, more consistency and better long-term gains. Establish short -, medium - and long-term trading goals to help offset FOMO and stay on the right track.
Derive pleasure from trading - Trading without pleasure makes it easier for traders to enter into a fear of missing the frame of mind. FOMO comes most of all from insecurity, jealousy, jealousy and greed. Once a trader has mastered it, he can get rid of the emotional state that comes from FOMO and trade to his maximum potential.
Curb greed
Greed is the biggest Nemesis for traders here. In particular, being too greedy for money can cloud a trader's mind with the fetishized notion that they must have the greatest wealth to achieve the greatest benefit and happiness. The truth is that this greedy desire is one of the most dangerous emotions that can break a trader's expectations for trading and future trading plans.
A few examples of trading where greed affects a trader's mindset include: using too much leverage to maximize potential trading gains; Doubling down on losing trades; Invest further to gain trading status. But like any other human emotion, greed can be curbed, managed, and overcome.
Advice to avoid greed
Think of greed as the opposite of discipline. Traders who are poised, disciplined, and consistent are less likely to fall victim to greed because they are well prepared before trading. This is why it is vital that every forex trader always follows a trading plan; You're much more likely to get into an emotional trading situation.
All trading plans should have strict guidelines for setting stop losses and minimizing the risk-return ratio. Keeping a trading log can help traders identify emotional trading patterns and fine-tune their trading plans to prevent falling into those destructive habits.
How to have a successful trading mindset?
Hidden ego - An inflated ego can change the way traders typically identify and execute specific trading setups, causing them to negate risk management strategies and being a major cause of failure. Traders also need to be open to the idea that winning every trade is impossible, and challenging losing streaks will test them to the core. While no trader wants to experience losses, traders can build account equity with proper risk management and trading discipline, even if they get a higher number of losing trades than profitable ones.
The Power of a Positive Attitude - Some traders harness the constructive power of positive thinking more easily than others. Whether traders are naturally optimistic, pessimistic, or somewhere in between, the ability to consciously empty out negative thoughts or replace them with positive affirmations is a trading superpower that every trader should strive to have.
Trade consciously - don't trade the forex market just because you can - it's a recipe for disaster. Trading with a purpose, which is achieved by following consistent strategy and risk management parameters. Finally, don't force trading in, because you usually do a certain amount of trading every day. Ask any successful trader; No doubt they didn't trade for days or even weeks, but they hung in there, weathered the storm, and came out the other side.
Re-look at the big picture - Many traders are under the illusion that trading Forex and making a consistent profit is easier said than done. They entered the industry with videos of marketing deals that presented them with a short timeline of trading goals, things they didn't know they simply didn't know, and their lack of experience. But successful forex trading is not a sprint, but a marathon, followed by disciplined trading.
Grasp the bottom line
When dealing with a bad situation, try to take a step back and remove yourself from the situation. Watch yourself for the negative state of your trade, and then re-analyze the market to see if you intend to trade, or if the market sentiment is against you.
