What drives us human beings? what is the force that drives each and every action we make?
The answer is simple: Emotions.
Emotion leads us in a way we cannot explain. from simple choices like eating a chocolate bar, to more complicated ones like asking a girl on marriage, our emotions, our feelings, are there playing their big part in the decision. There are two emotions that surpass all others: pain and pleasure.
Have you ever wondered why you eat that burger although you know that you are on a diet? or maybe why on your childhood you preferred to play rather than study?
We are often focused on instantaneous gratification that our short-term solutions eventually become long term problems. we naturally link pain or pleasure to almost every event in our life. And these connections we make will influence future decisions on similar events. If you ever had a car accident, you don’t want it to happen again, so you fear it, you fear the pain it caused to you, and this makes you drive more cautiously or maybe stop driving at all. And there are those who fear driving not because they had an accident but they fear it might happen. Their fear controlled them.
These feelings are very powerful, And may stop us from doing something as well as make us do something stupid. the point is, it happens all the time and we don’t even notice it, not only with bad things but with good things as well. But be certain that these connections will contribute a good deal to our future decisions.
- Forex Application
On the forex world, its not different. The beliefs we have about losing or gaining money will certainly shape our decisions in the market.
Let’s assume you lose a trade. That’s bad, right? Money going away and bad feelings kicking in. You may start to think that the market is rigged, or your system is a failure, or maybe you are a failure. All kinds of thoughts can come out of a bad trade. The majority of traders that fail on the markets, fail for a simple reason: the wrong mindset. they might have a solid system, that really works, but eventually, they will sabotage themselves. the truth is that for us retail traders, the market is driven by probabilities, and no matter how good your system is, you will be wrong at some point.
And here comes the decision that will affect your whole future on forex: how will you take this loss. Assuming that you chose to believe that your strategy isn't that good. With that in mind, on the next trade, you will not be as confident as you were before and that will affect your decision, that might affect the result, which might result on a loss, and this goes on and on, until you lose everything or change the pattern.
But how we change this pattern? How we change our mindset?
- Good Mindset
So, how do we avoid being caught in this trap of our own subconscious, and take charge of the decision making process? That is very simple. Embrace the loss. Take that as an opportunity to learn what went wrong along the way.
Ask yourself: reconsidering the result, could i analyze this setup better? Did i miss something? And if the answer is nothing, then move on! that doesn’t mean that you will not feel bad about the loss. The difference is that you will not let this lead you to a cycle of bad decisions. You understand that in order for your experience on the markets to grow, you need to make empowering decisions that will lead you forward! And be careful to not fall into the mistake to stick to a strategy that doesn’t work at all. Test it in a number of trades, making sure the losses doesn’t affect you, change along the way, and if it doesn’t work, drop it, and start over again!
I believe that is the formula for a successful trader, a good strategy plus a good mindset. One, without the other, is useless.
Best of luck for all of us, and remember, master yourself before mastering anything else...