Trading Psychology - Ways To Avoid Your Feelings From Messing Up Your Trades

In the Forex market, trading psychology is the change in ones perception that takes place once a trader becomes active in the market

. This change in perception begins immediately a trader changes from using a demo account to a live account. As usual, trading in the Forex market begins with a practice account. This is to allow the trader learn the trading concepts, devise his trading strategies, and also gain some confidents and skills need to participate in the market. The prospective trader starts by using a practice account which is a virtual account i.e. have no real cash. When using a practice account, it might seem very simple and easy making money in the market. However, this perception changes one the prospective trader starts using live account as he finds it very challenging thus start developing a change in his perception.

Effects of trading psychology

The Forex trading psychology has many effects on the traders participating in the market. The effect can have either a positive or a negative impact on the trading. This depends on the initial developments that took place when a trader switched to live account. The psychology of the trader will change depending on whether he starts making losses or profits. The trading psychology has greater effect on how the trader makes judgements when trading. The trader either develops fear or greed emotions. If developed, the fear emotion would prevent the trader from initiating trades when the opportunity arises. In addition, this emotion would make him close trades prematurely. On the other hand, the greed emotion would make the trader initiate many trades even where there are high risks.

Problem of emotions generated by trading psychology

As said above, trading psychology generates two kinds of emotion; the fear or greed. These emotions are very destructive and can make the trade have bad experience in the market and become less profitable or run losses if not immediately corrected. The fear factor would prevent a trader from opening a position when the opportunity arise leading to low profitability. Besides, the trader would hesitate from closing a trade even though the market position is worsening. Greed emotions on the other hand persuade a trader to initiate several trades even when the market is shaky and less profitable. This leads to bad experience in the market and series of losses.

Controlling and beating emotions

Trading emotions are bad and should be controlled. The first thing a trader needs to do to ensure that he remains profitable in the Forex market is to control his trading emotions. When trading in the Forex market, never let your emotions to take the better part of you. Using trading plans is the best way to combat trouble with trading psychology. Make your trading plan and stick to it all the time and your emotion will not take of your. In addition, use the available risk management tools that would keep you on the better side of the market.

Conclusion

There are many problems caused by trading psychology and they are affecting many traders in the Forex market. Inexperienced and new traders are the worst affected lots in the Forex market. The worst part of psychology problem is that it leads to massive losses and low profitability prospect if it develops. This problem is very detrimental and makes a trader have bad experience in the market. Ensure that you put your emotions under control so as to avoid this and remain profitable in the market.

by: Ownen Moore

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