The Psychology of Forex Trading

Filed under: Learn Forex Trading |

 

One of the things not talked about enough with regards to forex trading is that of the psychological aspect of trading. There are many different kinds of people, with different personalities, and differing financial situations. This makes everyone and their individual circumstances unique, and as such, everyone will need to apply a slightly different approach to their trading in order to fit their personality and their circumstances.

 

Something that can have a devastating effect on your trading bank, regardless of how good your market edge is, is if you are trading with money that you cannot afford to lose. For example, if you need to make X amount of money per month to pay your mortgage, then trading will become a very highly charged and emotional affair – and this is exactly what we do not want. We need to be indifferent when we are trading and let our market edge do its thing. Once you become emotional about your trading, you start to constantly tinker with your trades and you can quickly lose your edge and stop following your trading plan.

 

The other thing to consider is your personality. Everyone has a different one, and so there is not one single trading method that fits all. We have to choose a style of trading that fits our personality. You have to be comfortable with your trading and your levels of risk, otherwise again, it will become an emotional affair and you will not trade well. You have to treat trading like a business and be methodical and emotionless. Also, you must take the losses as a part of the process (think of it as the cost of doing business), and be diligent in your record keeping so that you can review and analyze what you have done.

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