When we start trading forex in the financial markets, many traders get preoccupied with various ways of analyzing the market but completely forget about trading psychology. Having suffered a loss after a while, they set out to find the cause of their misfortune.
Only then do they realize that the source of their mistakes is not in market analysis, but in the psychology and behavior of traders. A trader's psychology directly affects their results. Anyone is prone to emotions, especially traders.
When trading, they feel many things: excitement, fear, greed, despair, the thrill of getting profits, etc. To get them under control before starting to trade, a trader must be aware of how emotions affect his trades and which emotions can get in the way.
The main psychological factors affecting trading
excited
A trader needs to be excited before he starts trading. However, the expectation of large profits can be a "dirty" game for traders, preventing them from thinking rationally and making trade-off decisions. An energetic trader is almost always lost because their mindset prevents them from analyzing the market carefully and making trades wisely.
fear
Fear is a protective response that keeps many traders from entering dubious trades. The occurrence of fear is generally after seeing the "violence" in the trading market, and even a large-scale loss.
Long-term losses and liquidation, no matter whether you trade with fundamental ideas or systematically trade with indicators such as trend lines and moving averages, cannot change the losses. Once bitten, twice shy. Without the blessing of financial resources and a strong heart, if you lose a lot, you will naturally feel fear.
Why does the market struggle every time it rises, and every time it falls, it is a cliff-like way, which is caused by fear. This is also a manifestation of human nature, which is difficult to change and can only be controlled through necessary means. For example, plan transactions, light storage transactions and so on.
greedy
Greed is an emotion that affects almost everyone in the trading world. Especially for beginners, the desire to make large and quick profits often leads them to open a lot of unreasonable positions. Trading caused by excessive greed usually results in losses.
However, if a trader keeps ambition under control, it will enhance their trading. There is always a fine line between greed and fear, and no one knows where it lies. This is a personal characteristic of every trader and only those who manage to achieve it will be successful.
expect
False hope is an unfounded expectation that occurs when a trader loses a position. Putting their trust in market reversals, allowing for deeper losses rather than deciding on the size of losses in the first place, and closing trades appropriately when acceptable loss levels are reached. We need to hope for the better in this situation but excessive optimism can only do harm.
Self-control is a character trait of most profitable traders. With full control over themselves, traders will easily handle any emotions that arise during the trading process and make steady profits.
despair
Although in the process of trading, too much personal emotion will have the opposite effect. But as a human being, we can't avoid the seven emotions and six desires. It is also impossible to abandon human nature, it can only be controlled.
To control emotions, follow a trading plan
The vast majority of emotional performance comes from free trading without a perfect trading plan. Without knowing the operating logic of the market, every transaction puts oneself at risk, and there is no corresponding right or wrong response mechanism. Prolonged losses or no profits, any optimism will be wiped out.
Mental factors, derived from trading techniques
The so-called no technology no mentality. This is not to strengthen the role of technical analysis in the entire trading system, but there is no reference basis for trading, which is no different from guessing coins, because you don't know what you are facing. Ignorance is the source of fear.
Therefore, instead of leaving the profit and loss to luck every time you trade, it is better to polish your technical system from now on, first have a way to deal with the market, and then use time to test and hone your mentality.
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