Trading Psychology For Forex Investors

Trading Psychology: The keys to success

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The key to success in Forex is trading psychology

To succeed in trading there are two fundamental factors that depend directly on you: The first factor is the knowledge and experience that is achieved with dedication and a lot of practice. The second factor, on which we will focus on this article, is in your mind with your attitude and with the proper control of your emotions.

The path to success in trading is no different in many other facets of your life, for example if you practice a sport, in addition to many hours of practice, a good psychological and mental preparation is essential to face the opportunities, sacrifices, obstacles , victories, failures,…

Trading psychology is vital for any beginner trader, who must develop their own investment strategy while learning to deal with these emotional factors. But it is also for professional traders who must remain psychologically strong and not lose discipline in order to be consistent and profitable for years.

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Trading Psychology and Trading Patterns – when the usdjpy broke the 100 level

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Trading with price charts in the currency markets implies looking for repetitive shapes that happened in the past and by the time current price is making a shape like that traders have an educated guess about the possible outcome. This is what is known as a price pattern.

So looking for patterns when trading is one of the things that traders have in common as this helps forecasting price for the next period, depending very much on the time frame the pattern is being identified. If, for example, a head and shoulders pattern is identified on the weekly or monthly chart, then the measured move for it implies quite a strong move price will make.

When patterns are being used in combination with market psychology, the analysis becomes even more complex. It gives the trader a competitive advantage as, on one side, the pattern represents something from the past that can be projected into the future and on the other side market psychology comes to confirm/infirm that specific move.

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Why it is so difficult to succeed in the Market?

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Forex trading success

The financial markets such as the currency market (Forex), futures, commodities, stocks and other offer excellent opportunities to invest our capital and make money speculating on the price of these assets. But statistics tell us that the vast majority of those who venture into the market end up losing money. In fact, it is interesting that statistically speaking it is easier to become a lawyer, engineer or doctor that a successful trader. More interesting is the fact that the success in this field has little to do with intelligence or preparation of the individual. There have been cases of smart and well prepared academically speaking people who never saw a penny in the market and instead I have known other cases of people with an intellectual and educational average level who earn tons of money constantly trading in the market.

For this reason, we will discuss in this article some of the main reasons leading to failure of most novice traders.

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Confessions of a Forex trader

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Like many people, I came to the world of Trading hoping to make money quickly, I took some online courses, I opened a real account – which obviously loss- and so began my career in the difficult world of trading. It was not easy, many times I was about to leave, then resumed with more force and win, but it was very difficult. This was the most difficult journey of my life, that was more than six years ago, and today I see with nostalgia that time, and whenever I have a chance to talk with rookies in trading, I emphasize that the way in trading is difficult and hard, but the reward is great.

6 years ago I would have liked someone to advise me, to explain to me so much of the trading, but  that was not the case. In this market are few people who tell you things as they are, they are few who will tell you the reality of the trading with words. I try to do it in these confessions, and I hope that you take note.

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I left my trading account in zero: 4 steps to recover

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So you have lost your trading account and now is in zero? Oh, man, I’m sorry, this have also happened to me several times …… !!  But let’s be a little constructive and rather than lament the big loss let’s think why the account was ruined and what we should do and as evil of many is the consolation of fools, think that ruin Forex accounts is something quite common.

Perhaps you are tired of hearing that 90% of traders lose money in their first year of trading. I really do not know if this statistic is very accurate, but unfortunately for what I see, I tend to think that is true. I myself have had accounts that have practically fallen to zero: lack of discipline, not following the trading plan designed, etc. are usually the most common causes that lead to continuous losses that diminish and undermine trading accounts even to activate margin call.

But do not miss any illusions, I believe that even the most famous and respected traders have failed at some point and have reached the bottom to return to the market and be successful.

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Trading Psychology II

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In this article we will continue with the main ideas developed about the relationship between trading and psychology that we discussed in the article “Trading Psychology”. First at all in that article we discuss the fundamental role that psychology plays in the performance of a trader. Among other aspects, we explained that in most cases the traders loss money due to their fault and because they are not prepared psychologically to face the market environment.

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Trading Psychology

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Why psychology in trading is so important?

Trading is a very hard game. A trader who wants to succeed must take very seriously what he is doing. You can not afford to be naive or to trade for hidden psychological reasons. Unfortunately, trading attracts impulsive people, players and those who think the world owes them something. If you practice trading for the excitement it produces, it is possible that you may perform many trades with little chance of sucess or accept unnecessary risks. The market does not forgive and the emotional trading always carries losses.

The feelings have an immediate impact on the trading account. May be you have a brilliant trading system, but if you are frightened, arrogant or upset is almost certain that your account will suffer. When you realize that the thirst for gambling is gaining or fear clouds your mind, you must stop trading. Your success or failure as a trader depends on controlling your emotions.

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Why So Many Traders Fail?

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The trader and the market

The reality is that the numbers do not lie, almost 90% of those who are starting for the first time in the financial markets like Forex just fail and lose their hard earned money. In fact, there are only a few traders who makes huge profits and live comfortably with this activity. The question that comes to mind then, is why many people fail when begin to trade in the market?
 
In my opinion it is not a matter of intelligence, since even highly intelligent and prepared people is swept by the market very easily. In fact it is not uncommon to see doctors, lawyers, economists, engineers and similar losing large amounts of money constantly, money that they can not afford to let go as if nothing. It is also possible to find people whose skills and academic preparation is not the best, but they have being successful  market speculators and therefore earns tons of money.

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