The psychology of successful FX trading
They are plenty of trade methods, which turn a few traders into
successful whereas many traders experience failure. The important question is: Why
do many traders fail?
Several researches show that numerous factors contribute to
their failure. For instance, they expect to get lucky and make money. They trade
in luck in order to make money. They think that the trade is a game of chance
and luck and don`t study to acquire a trade system of knowledge to succeed. They
are attracted to the market by greed whereas their greed overcomes their need,
which lead to self-destruction. They don`t focuses properly and as a lack of
concentration, they dismiss opportunities. They don`t have a defined trading
strategy. Unsuccessful traders follow emotions more than reasons and they
are unable to handle the stress. They don`t pay attention to the facts and logics.
Various researches indicate that the human brain is divided
into two lobs: the left and the right lobes. The left lobe functionality is
analytical, logical, rational, realistic and intellectual in contrast, the right
lobe involves emotional, subconscious, intuitive, sensitive, and imaginative tasks.
When trading in FX market, because of the significance of using trade plan and analyse,
left lobe of the brain must be used not the right one. The more you become
analytical and strategist, the more you will use your left side of brain and
get used to it!
Making money is fun and creates enjoyable feelings while
losing money is an unpleasant experience. Physiological symptoms of loss such
as feeling of stress, muscle tension, racing heartbeat and sweating as well as mental
symptoms such as nervousness, frustration, irritability, low self-esteem, and disappointment,
could have a destructive influence on the trader`s performing, lead to failure,
and giving up. A trader has to learn the ways to deal with the negative symptoms
of loss and attempt to minimise its drawback affects.
It has been suggested that successful
traders have specific characteristics. They enjoy trading, envision their success,
and are able to handle risks properly. Personal characteristics of successful
traders would be energetic, diligent, decisive, optimistic, strategist,
tolerant, organised, self-reliant, independent, and motivated. You must review
your psychological status constantly and check which characteristics you must
improve on. To become a successful trader you must:
Study how the market operates. You must have education regarding how
the market works. This enable you to identify opportunities, stay focused, get
less emotional and concentrate on your
Take your time to analyse and understand the trading market well. You must
implement the appropriate indicators based on your trading strategy.
Risk management is an important aspect of trading. Although you cannot quantify
how much you will profit during trade, you can quantify how much you are
willing to risk and/or lose. You should forecast a potential for loss and don`t
risk all your capital in a single trade. Never risk more than you have allotted
to the account. Identify where to place the stop loss to manage your risk. Pay attention
to your losses and make sure they are small amount to allow your profits to
Create a trade plan ahead, specify your strategy based on your purposes
and desires, and act according to your trading strategy. Don`t divert from the
plan without preparing an optional trade plan.
Sometimes it may happen that you will feel attached to the money you
have invested in trading but remember the more emotional you are, the less
profit you will gain!
While making money is enjoyment, learning to accept a loss is a very
important lesson a trader has to learn. Trader must know how to handle stress
and the ways to reduce the negative physiological symptoms of loss, which have
a harsh affect on trader`s achievement. As each individual has different personality,
aims, background and culture, every trader has to find out the ways to minimise
negative effects of loss individually. Remember no one has %100 success in
trade and it is important to learn from mistakes and convert losses to an opportunity
for learning and growth.
Don`t tie to the trade, be quick and diligent to change direction if
that is what the signals indicates.
There are many trade methods but the most important trade
system is you as an individual! You must have a trade system, education of how
the market works and a clear understanding of what trade rules you abide by! These
simple steps could lead you to the pathway of successful trading!