In Forex jobs, same as in trading other instruments like stocks, there are rules to become able to control reactions and emotions, in order to regularly earn profits.
Currency traders need to learn and train on how to control emotions in order to use common sense and logic instead of emotions and bad intuition, before achieving successes and becoming able to enjoy the fruits of their work.
In this article, let’s have look at the four most common psychological traps of beginning traders:
Speeding up
The prospect of fortune covered by numbers and prices is sometimes unbearable, causing feelings euphoria with good positions and frustration with bad positions, which are both destructive, as far as further trading is concerned. When we suffer a loss our frustrations order us subconsciously to make it up as quickly as possible. The next position we open unwittingly and it is usually a bigger position in order to compensate for the loss and to gain at least a small profit. Our losses will continue to accrue – until we lose everything.
The same is with euphoria. If one position earned us a profit, we assume that the next will also. So by speeding up on one position, we can lose what we gain on good decisions.
How can we fight against speeding up? There is only one remedy – feel neither frustration nor euphoria. It takes time and requires work but it is a necessary step that every trader should go through.
Golden Grail
The multiplicity of technical analysis indicators is overwhelming and each day new indicators are created at the same pace as new golden trading systems. Each Forex trader creates its own trading system, which works good enough. However, everybody wants to make their creation even better – and the same situation occurs.
Trading systems or strategies become bigger and bigger involving numerous indicators and this creates confusion. Searching for the perfect, golden system – the Golden Grail of Foreign Exchange – becomes soon the most important aspect and we may end up unable to understand ourselves how our system works, not to mention explaining it to others.
How can we fix this? By keeping in mind that the most effective systems are the easiest ones, which that generate not more than a few signals a day. The trick is not to trade often, but to trade efficiently.
Self-belief
As in other aspects of our lives, we have to trust that our decisions aren’t emotional and to take into account others’ opinions. Before we start trading, we can use daily recommendations available on different websites in order to confirm the signal generated by our trading strategy, even if “specialists’” opinions make mistakes, too, more often than we suppose. However, two heads are better than one, not to mention even more heads.
How can we fix this? Most of the analyses and prognosis can be synthesised to the three statements: growing, falling or sideways. If the average “rate” is the same as our calculations, then we can start trading.
Fast money
Which are our objectives, the monthly profits we want to achieve? Obviously, everybody would like to double their capital each day. However, the sooner the beginning trader will understand the superiority of relatively small but consequential profits over spectacular explosions of profits accompanied with huge losses, the easier for them will be trading on the Forex market.
In short: the larger the planned profits – the larger the risk. Very good traders achieve around 10-20% yearly profit. If you think you can earn it in one day, you didn’t get to realise yet how much you will lose if you won’t be able to earn as much.
Discipline and keeping consequences in mind can determine up to a big 50% your success in Forex jobs. The rest will be given by inborn talent, good luck and, of course, knowledge and training, which can be achieved within the market (either on demo or live accounts).
While practising, observe your own emotions and try not to let them have an impact on decisions you make. In the course of time, euphoria will change into satisfaction and frustration will disappear completely. Losses from time to time are the part of trading – it’s a part of its nature. Accepting them without the reflection of emotions leads to success in Forex jobs.
Read more: What is Forex Trading all about? Who trades, where, when, and why. – How to trade currency online: basics to learn about the Forex Market
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