5 common psychological mistakes in forex tradingForex trading is undoubtedly exciting but challenging. According to researchers, it might even take up to 10,000 hours to master the art of forex trading.  On the other hand, a common belief is that forex trading is a way to make quick money, but what they don’t comprehend is that it is also a way to lose money quickly.  Successful trading is a result of conquering your mind and your thoughts. Many of the beginner and inexperienced traders lose a lot of money because of forex trading.

The irony is that the psychological aspect of forex trading is not even considered until it has been too late. When we know that our psychological behaviors might influence us, we eventually understand that it might impact our trading on an intuitive level. Mindfulness and complete awareness are usually enough to induce change. This change can only be useful if we want to mend our ways and improve our trading on a psychological level.

Charts, pivot tables, fundamental analysis and technical analysis, may not be wrong, but our perception about all these technology tools can be false. We can be successful if we remain objective and focus on our goals ahead. Having a knowledge of the fundamentals of the market can minimize the fear of loss and then the trader will be able to make trades based on objective analysis rather than gut feelings.

Be that as it may, as we proceed with the article these 05 psychological mistakes made by forex traders will help you in strategizing your trading moves based on your psychological impact and avoid making any of these mistakes in your future trades.

 

Overconfidence

Overconfidence is a deal breaker in every walk of life. There is a very thin line between confidence and overconfidence. The moment you cross that line, you will start losing money in your trades. Pursuing forex trading as a means of living can either be the sweetest dream or a nightmare for you. The moment you think that trading is easy is the moment you lose before even beginning the trades.

It can’t be emphasized more that forex trading is not a piece of cake. It is very tricky. You need to remain focused entirely disciplined while forex trading which can be a difficult task. Be confident, and you can earn money big time. Be overconfident, and you will start losing money before even realizing where the problem is.

 

Lack of Emotional Control

The natural course of action for our mind is assuming the worst-case scenario. Usually, it happens to save us from any emotional or psychological trauma. Therefore, whenever you start forex trading, your mind will begin assuming the worst-case scenario which is losing all the money. If you start acting according to the scenarios build up by your brain, then you can never do trading. There has to be a perfect balance between the situations assumed by your mind and the situation right there in front of you. Overriding this self-protecting mechanism is an art that every forex trader should master.

You need to control your emotions. You need to understand that taking risks is an integral part of forex trading and your mind should get used to it. You need to understand and make your mind realize that the risks that are being taken are calculated and based on technical and fundamental analysis.

 

Fooling Yourself

Don’t justify your decisions are making a trade. The outcomes of the market will do that for you. The outcome of trade can either be a loss, break even or profit. Don’t fool yourself into thinking that every trade you make will result in a profit for you. There are different strategies employed, and the outcome of each trade is different. The strategy that might work for one trade may completely backfire in the other trade.

Rather than focusing on a single outcome, channelize your energy on the overall outcome of the trade. Once a trade is completed, don’t dwell on it giving clarifications to yourself. It will result in a loss of time as well as loss of any opportunity that might have come while you were dwelling on your previous trade. Accept the outcome of your trades and move forward.

 

5 common psychological mistakes in forex tradingJumping the Gun

Being at the right place, at the right time making the right trade is a dream scenario for any forex trader. The problem arises when you are at the right place at the wrong time. This usually happens when the traders are hasty and think that they might miss a chance.

Don’t be afraid to make your move at the right time. The moment you realize that you won’t be late is the moment you will start making money. If you pull out early, you might regret it. The prices might start going into the direction where you want them to be, but the irony, you are not in the trade anymore.

 

Not Thinking in Probabilities

Forex trading can result in either profit or loss. You should treat a loss as normal and accept it to be part and parcel of forex trading. Don’t get all down and mellow because of your losses. You can never be right 100% of the time. There is always a margin of error, no matter how small it is. Accept the fact that losses can occur, but right trading strategies can bring you huge profits also.

 

Conclusion

Forex trading is impressive, attractive and can yield a lot of money. But if you don’t have a firm grasp on your emotional intelligence and psychology, forex trading can result in massive losses also. The first step is acceptability of the fact that anyone can make the above psychological mistakes. Once you have accepted this fact, then you can train yourself to minimize the impact of psychology and emotions in your forex trading decision.

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