How Price Action Analysis Can Improve Your Forex Market Psychology

Any professional forex trader will agree that psychology plays a much larger role than method in achieving consistent profits

. In fact, the most difficult part of speculative trading or investing in any market is maintaining an objective mindset and not letting your emotions control your decision making. Employing overly complicated methods with lagging indicators and other unnecessary analytical tools will only hold you back from achieving your optimum psychological state while trading the forex market. The best method to trade forex or any market will enable you to remain calm and collected because you won't have to second guess your trading technique. Many traders never accept the fact that a complicated and technically difficult to understand method is not required to successfully trade the markets. On the contrary, generally simple yet adaptable trading methods combined with a healthy dose of self-discipline are the main ingredients to long-term trading success.

Trading off of specific price action setups can greatly contribute to achieving and maintaining the objective mindset required in forex trading. If you find yourself second guessing your entry or exit methods than you are probably using an overly complicated method to trade the markets or maybe you don't even have a method. The forex market and all other markets generate information about themselves every minute of every trading day. Once you learn to read price action setups a naked price chart will look more like a map to you than a bunch of meaningless price bars. The market inherently provides signals for its most probable next directional move. Many traders, for a number of psychological reasons, decide its better to cover up this natural price information with lagging indicators that are derived from price yet display it in a less clear format. This primitive need to over-analyze and over-complicate stems from many factors both cultural and psychological.

The most important thing for any aspiring forex trader to understand is that you can become a professional trader with a simple trading method. The most important aspect of trading success is how well you can manage your emotions in reaction to trading activities. When you see the market for what it is; price movement over time, and employ a method that makes good use of this information in its natural state, you give yourself the best shot at maintaining and achieving emotional clarity. The reason we so often hear that only 5-10% of traders actually make money consistently is because only about 5-10% of the population is able to effectively manage their emotions and keep their ego in check enough to stick around long enough to make consistent gains in the market.

The big secret that wealthy people never let those not as well off in on is that making a lot of money is not technically difficult. It can be, if you want to become a doctor or lawyer, but many business people never finish college, look at Bill Gates. Making consistent big money involves intense control of one's emotion and clarity of direction. These are the same attributes that define successful forex traders as well. An intensely disciplined trader with a concise and clear trading method is a trader who will make money consistently in the markets.

by: Nial Fuller

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