Understanding All About Psychology in Forex Trading

Psychology in Forex Trading




 

Forex Trading is a lot more than just using your computer and an internet connection to make money. Forex Trading contains more than just this and that explain why a lot of Africans are finding it difficult to comprehend how to consistently make money from it.

There is a term people call PSYCHOLOGY. It is the study of the human mind and how the mind tries to accomplish a certain task.

According to American Psychological Association, Psychology is the study of the human’s mind and behaviour. Which include how it (mind) works and the overall impact of the mind on human behaviour.

There are many things that alter the state of the human mind and its behaviour such as drugs, anxiety, depression etc. and making money and losing money is one of them.




Can you remember the last time you made money as a forex trader or a scenario where you just got money you didn’t put much effort into? How about the emotional distress you passed though when you opened your wallet or saving box and you didn’t see the money you had kept all along, all these actions plays a critical roles in the human’s mind and can totally change the behaviour from being calm to being aggressive or getting super excited.

ALSO READ: How to Ride the News in Forex Trading

This same mood change and state of mind happens when we trade the financial market especially forex that is extremely rapid and volatile.

To all the forex trader reading this article, what was the feeling you got last time you almost doubled your trading account from a single trade and also what was the feeling you got the last time you almost emptied your trading account from a single trade loss.

Do you want to get articles like this, then take 60 seconds of your time and subscribe below

Subscribe Now!!!

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 134 other subscribers

We can see that the feeling we get from “winning a trade” is totally different from “losing a trade”.

There are some actions that influences and affect our minds, so what are these actions and how do they influences our mind especially our behaviour.

FEAR

We all have our weak point, which almost at all time trigger fear in us. Take for example, some people might have the fear of snakes, spiders, height while others losing.




Placing a trade on the market will always have two outcome which will include A LOSS or A WINNER. So loosing is evitable but there are people who have the phobia of losing and will try anything within the reach to stay profitable and that include holding losing trade more than there required period which most times leads to a blown account.

holding unto loosing trade gives most traders the believe that a currency pair, stock or commodity will later move in their favour this wrong impression has drown so many people’s account and money and has made so many people call forex, stocks etc a scam.

Psychology in Forex Trading




The fear of losing has changed the state of mind of traders from good to worst

GREED

The forex market is so liquidated and volatile that it receives more than 3 trillion dollar daily and you can make money identifying when the price will go up or when it will come down.

Trying to make this money by all means will only make you lose the money you have manage to secure to secure.

READ: What Does Pip and Point Stand For In the Financial Market?

There are times one need to stop trading and secure the profit he has made and there are other times where people have failed to understand this concept even the Christian  Holy Bible reject the idea of being greedy.

PERSONALITY

Your personality will reflect on your trading habit or mood. Take for example patient people are known to be the most successful traders while short temple people are known to be the losing one.

Your personality can hinder, if not disrupt your psychology. Let me give another better example. Patient people place trade and hold it for days to week thus reducing the anxiety and emotional displays on the market but traders who are short temper tend to trade blindly without any direction.

We have seen how FEAR, GREED and your PERSONALITY affect your psychology in forex trading.




Though there are many other reasons such as Anger, Hatred, Jealousy, Indiscipline, Independence etc. that affect the trader’s state of mind. The ones I have explained are the main reasons that causes the main harm.

CHECK THIS: How to Invest In Bonds in Nigeria [Detailed Guide]

I remember earlier this year, before this article was written I had some running trades on, after some hours, when I opened my trading platform, I saw that my open positions were in loss but I wasn’t bother because they haven’t reached the level I intended to close them, so I left the trade overnight without a stop loss.

To my greatest surprise when I woke up in the morning, they were in profits, I was astonished but the next they I saw how they were going against me; slowing my profit where depreciating.

That moment my behaviour changed from being happy and super excited to being angry. I was in self-doubt, what was going through my mind as at then was  “should I close my open positions in the market should I not” and funny enough what kept me from closing my positions was the illusion that my trade will later move back in my direction and the fear of losing that trend movement.




Slowly greed creep in and before I knew it I had lost more than 80% of the profits acquired and when I finally close my trades, I was able to capture just 20% of my initial profit

I always advise trade to pay more attention to psychology because it can ruin your trading career

I would love to hear about your opinions please comment below and if you find this article interesting please share it with your friends and family using the share button below.




Leave a Reply

Your email address will not be published.