Psychology

What are the dangerous emotions?

Anxiety, fear and panic Anxiety is one of the worst enemies of traders. It tends to convince them that they will not make money regardless of the power of their trading strategy. So, instead of making big profits and earning a lot of money, they do not initiate any risky trades or exit their positions earlier than they had established being unable to wait for the fulfilment of their initial goal. It is the most common mistake of novice traders. On the other hand, people are not indifferent to their hard-earned money. They don’t like to sit back and watch how their trades are acting against them. They will probably do something to stop the bleeding. And if they do not know how to act in this stressful situation they panic and take actions that usually lead to financial losses, such as entering into new trades hastily without prior analysis. Periods of market volatility are the most common catalysts for such irrational actions. Following the increase in price fluctuations as a result of loss of confidence in our trading decisions, some people start questioning their own trading strategies and try to change something at peak times. Keep calm. Panic will only distract you. Remember your goals. Always use Stop Loss and Take Profit orders. Once you place protective orders, stick to them. Greed Forex Traders are money-oriented people. They are money-oriented and attach great importance to their financial success. Moderate amounts of this type of focus are quite necessary. But if this healthy stimulus or orientation is no longer healthy, it can cause financial losses. You must learn to control your appetite for profit. Otherwise, you risk emptying your pockets. For this not to happen, you must apply a disciplined approach to your trading activities that would minimise the role of emotions in our trading decisions. Euphoria Sometimes traders also fall into euphoria. They experience intense feelings of excitement and elation after a string of profits. They aspire to receive more in the future and see a truckload of trading opportunities. In simple terms, they are sure that they managed to find a perfect win-win approach to Forex. But in the long run they are disappointed, because after the sunshine comes the rain. The trader gradually comes to believe that no market analysis is perfect; that the next trade will not always be profitable. The period of euphoria ends and the trader becomes more cautious in his future trades.

Don’t get carried away. Know when to stop during your winning streak.

Getting into the right mindset for successful forex trading The number one rule is to adhere to the initial trading plan and properly execute the basic rules of money management. Follow a defined methodology. Rely on logic and not impulses, as in a trade entered on impulse you will probably forget about proper risk management. You should feel that you are making the right move and not worry about the end result. Do not bury yourself in regrets if the price continues to rise after you closed your bullish position. The market is not going anywhere and there will be plenty of other opportunities to make money. Some authors talk about the “zone” – a combination of positive mindset, focus and adherence to trading discipline that allows the best traders to keep producing excellent results day after day, year after year.

Dealing with losses Get used to the idea that losses will occur. There is no trader in the world who could manage to make a profit on every trade. I understand that you cannot go back in time and execute your trades once again. It is like being on a diet and eating chocolate cake. Once you’ve eaten all the candy, all you can do is go back to the gym and start working out to fix it. It’s the same with trading. Once you have lost money, analyse why it happened, draw conclusions and use the knowledge and experience to improve your trading system. Don’t think you need to make up the lost money. Accept the loss and move on. Your goal is not to compete with the market, but to make money in Forex.