When we speak of Forex trading, you need to be focused and make use of your mind in order to win. In fact, long time traders have revealed that the psychology plays a great role in your individual performance and it also works wonders on the way the market moves. If you wish to make a winning move then you need to be completely in control of your mind and know the manner in which psychology propels the market.
Understanding the psychology of the market is not a new trend. You don’t need to be an expert to realize that any area whose rise and fall is dependent on the people’s choice is sure to be dependent on the thoughts and mind of the people. A very small segment of people consider all the myriad levels of mind games, which work on the market structure.
However, if you only analyze the manner in which psychology has an influence on others, and limit yourself to the understanding of mass psychology of the people who are involved in the currency trading and ignore your own mindset, then you are surely going to hurt your position. The most competent and well versed Forex traders will surely insist that you must have a better understanding of yourself and identify factors that tend to influence you if you wish to become a successful trader. This awareness will help you to channelize your weaknesses and tap your strengths. Often people have the misconception that they already have a clear understanding of themselves and realize the extent to which their mind influences their choices. Here we will elaborately explain it in a simple manner.
Whenever a large amount of money is at stake, then such situations are sure to be emotionally compelling.
People often say that playing the market is purely based on the mathematical calculations and understanding. Most of the individuals believe that if you get the numbers right, then you are sure to end up a winner. However, if this is the case then what is the reason for a large number of traders to suffer losses in the market, even though they all have access to the same numbers and identical data and information. If the market was based only on calculations all the people with accurate calculations would win.
Although, numbers are not deceptive, our mind often deceives us and this makes us interpret the figures in a biased manner. Our hopes and fears surely make us believe what our mind wants us to believe, even though it may not always be the truth. Currency investment is not limited to money. Rather it is also an emotional investment where you need to be correct at all times. When you lose, then your pride too takes a hit. This is what makes a loser believe that the phase is sure to bounce back. Your mind is simply not willing to accept that you are wrong and you seem to have a false conviction that you are sure that your calculation, judgment and understanding are always right.
The main essence is that it is difficult to control your emotions and never let it influence your decisions.
For many people it is very much important to be correct rather than earn money.
The best method to make real money in Forex trading is to allow the winners to enjoy their moment of triumph and accept your failure gracefully. If you have to do this, you need to come to terms with the fact that not all your trades are going to win. If you loose on any trade, then it is better to quit and try your luck at another trade. You have to understand that your self esteem is not dependent only on making the right pick in terms of trading. A few wrong choices do not make you a looser in life. If you wish to win then you need to have the courage to move on and deal with the loss.
Loosing traders view losses as signs of failure while winning traders view losses as signs of learning. It means that perception does matter.
Recently I got to know that Thomas Edison had unsuccessfully invented around 100 light bulbs which did not work, before he finally tasted the success with the invention of a working light bulb. It was his belief that propelled him towards success. He believed that it was possible to create a source of light using electricity. He had faith in his original theory. Thus, whenever one of his designs used to fail, he took it as an elimination of one possibility. He continued to eliminate the possibilities until he eventually figured out the one that worked.
Winning traders too feel the same and will surely relate to the above mentioned example. They perceive failure as a new insight into the working of the market.
Winning traders often focus on a larger picture, while they continue to play in a limited arena.
If you happen to meet a person who has made 75 trades in which he had lost money and 25 trades which were profitable, then majority of the people consider such a trader to be a poor trader. Although such a trader may be wrong in majority of the cases, yet this does not make him a looser. It may be that the average loss was 1000 dollars while the average profit on a winning trade was 10,000 dollars. Thus, despite losing 75000 dollars on unsuccessful trades this trader has more than covered the losses by making a profit of 250000 dollars on winning trade, thus making the overall profit of 175000 dollars.
It is simply a numbers game, but how will a trader stick to it even after making continuous losses in each trade. Never forget that it takes much more than a single trade to make or break a trader.
Remain focused on the trade in hand and keep track of the triggers that you have set up. Be clear of what actually matters to you and then keep track of the overall record.