What Is Forex Trading Psychology?
Forex trading psychology refers to a trader’s emotions and their mental state. It is one of the most important deciding factors of whether a trader will make it or not . It is also about a trader’s character which plays a big role in influencing their trading decisions. Most failures in Forex trading are more about how traders manage themselves.
Manage Yourself, Manage Your Money
I always say that if you can manage yourself, you can definitely manage your money. Most traders think that the most important thing for successful trading, is finding amazing tools and trading strategies. I also understand that we cannot control what happens in the markets, but we can always control ourselves. Now that we know what Forex trading psychology refers to, let’s look at the few specific behaviours and emotions that can be associated with it.
In whatever that we do, we mostly need a certain level of discipline, without it, chances of being successful are limited. I will make an example with trying to keep fit and getting healthier, we need a lot of self discipline/control in terms of what we eat and also making sure that we get moving and exercise. If we lack self control, we will feel tempted to eat junk food and justify it by saying that everyone around us was eating junk. I love using these as examples because I know how difficult it is for most people to discipline themselves in terms of what they should eat and not eat. Healthy eating is one of the important things that I am passionate about because health is wealth. Let me go back to the business of today before I go on and on about food and health.
How Important Is Self Discipline?
When it comes to Forex trading, discipline should be your strongest weapon. If you cannot discipline yourself in the markets, the markets will sure discipline you through a margin call and that is not a nice thing to experience as a trader. Disciplining yourself involves you saying NO to that urge to trade all the time/over trading, using a bigger lot size when your account is small and risking more that what your account could handle.
What Happens When You Lack Discipline?
When you lack discipline, Forex trading feels like a very bad addiction. When you lack discipline, you are unable to stick to your own plan. The good thing is that discipline is something that can be learned, as long as there’s a will to learn and enough support from a Forex trading mentor/coach. I have learned that it is easier to win when you have a support system to help you up when you stumble (that’s basically what I do with my mentees). A mentor/coach clears a way ahead for you. I never do anything without a mentor/coach until I can stand on my own. Normalise doing the same, it really helps.
When fear strikes, you are likely to miss out on great trading opportunities for the fear of making mistakes and losing money (especially if you’ve made some mistakes that lead to you losing money). The fear of missing out is also another form of fear that is associated with Forex trading psychology. When this type of fear strikes, a trader feels like if a day goes by without placing any trades, they are definitely missing out. But the truth is, a missed trade is never a loss. There’s another type of fear that I won’t indulge in that much on this post, and that is the fear of success. You can read all about it in the post that I published a year ago, HERE.
According to its definition, greed is a selfish want for something beyond one’s need. A greedy trader is a trader who is never satisfied no matter how great their trading session can be, it always ends very bad. No matter how much they make in a day, it always ends in great losses at the end of the day. A greedy trader never takes money home, it only goes as far as trading history. The good thing again is that, this is something that can be unlearned, as long as you’ve identified and acknowledged it, you can learn NOT to be greedy. Unlearning forms a big part of learning, read more about that HERE. A while ago, I published a post about overcoming GREED, you may want to check it out.
Forex trading psychology is also that one area that I focus the most on. I recently started posting weekly tips on the App that are mainly focusing on Forex trading psychology. The main aim is to help you shape your mindset and gear it up for better trading experiences. The weekly tips are only posted on the app. You can download the app on Google Playstore and make sure that your device allows push notifications to be notified whenever a new weekly tip on Forex trading psychology to improve your trading is posted. Thank you so much for stopping by.
I really hope that this post added some value in your trading journey. To help me reach out to more people who may be in need of this content, kindly share this post and subscribe for future publications. Keep well, wear that mask, wash your hands, practice social distancing, sanitise and stay safe.
There’s a thin line between trading and just gambling
The statement above can be very true for many people. It was also very true for me too for so many years. It is very easy to adopt a gambler’s mentality when trading the financial markets, especially when you are expecting trading to be exciting and you are viewing it as some cash slot machine. How you view your trading account makes all the difference and has an impact in your performance. There are a number of contributing factors which may lead a Forex trader into becoming just one more gambler without even being aware. On this post, I want to focus on this one big factor listed below.
From the day a Forex trader decides to go from a demo to a live account, things change in so many ways. The trades that they do become emotion based instead of logic based. They become indecisive about so many things, like when to take profits, or when to cut the losses and whether to enter the market or not. If you start to feel like that, you have just discovered the effects of trading psychology. It is just a phase that is likely to pass if you really want it to pass. What you do after that, will determine whether you’ll succeed or you’ll become a gambler.
How does this affect your trading?
It actually clouds your judgement. There are two most important emotions that I am sure every trader has experienced in their trading career, these two are:
Fear can either cause you not to place a trade even when opportunities are plenty in the market, or it can make to you to close good running trades prematurely without giving them a chance to actually be profitable, and it can also cause you to hold on to a losing trade even when there is no hope for that particular trade, for the fear of being a loser. As long as one stays in the market, this emotion will at some point affect them. We all go through it at some stage of our trading journey or career.
The good news though is that it does get better with time. Actually, it does disappear completely. Think of the first time you had to be in the car driving alone and think of yourself now when driving alone. The fear that you had is no longer there. But if you stopped driving on that first day just because you became too scared and you ended up crashing your car, you would not be as experienced today. What made you become better was the fact that you never stopped driving and you faced your fears head on. That gave you strength to keep on trying and improving. You did not park your car and go back to public transport. It’s not just driving, there are so many other situations when you had fear and today you are a master in that area of your life simply because you did not give up.
Greed is the most dangerous zone, you don’t want to find yourself here. This emotion can cause you to take trades that are too risky with an aim to score big or to make massive profits in a short space of time or it can also be just about trying to appear clever and impress the crowd or even to be seen as the best. Greed can also make you to not close winning trades hoping that you can still make more out of them.
This emotion causes a trader never to be satisfied even when they make profits. They keep on holding on to a trade until they sometimes find themselves on the wrong side of the markets. When they are finally on the wrong side of the markets, they want to trade even more by opening more trades in the opposite direction to make up for a loss.
The good news again is that this emotion can be dealt with effectively as long as you are willing to put in the work that is needed. A good mentor/ coach is able to assist with such issues. I work together with my mentees to help them deal with these issues and I have had successful cases (but only where there was willingness and commitment from a mentee) Should you need private lessons, mentorship and coaching, you can enrol here.
Just like any other business whether online or offline, risk becomes part of it, but it should be a calculated risk because if it is not, it can eventually lead to the business closure. In closing, we can all be profitable traders as long as we understand that we never lose but learn, and we focus more on being consistent and getting it right because by getting it right, the profits start pouring eventually. Thank you for stopping by. If you find value in this post, kindly share with your peers and subscribe for weekly publications. You can also download the App on Google Playstore for a quick read and weekly tips which are only posted on the App.
How to overcome fear in Forex trading
Hello subscribers and readers. Today I want to talk about fear and how it can affect your outcome in your Forex trading. There are different types of fear that one can experience in Forex trading. But before we get into that, let’s have a look at what exactly is fear.
What is Fear?
Fear is an unpleasant feeling triggered by the perception of possible danger. It could be real or imaginary. We are likely to feel our hearts beating faster, shaking or even sweating when we experience fear. It’s not a great feeling at all. Imagine having all those feelings where money is involved, real bad right?.
There are different types of fear, but in this post I will only focus on 3 types that are the most common when it comes to Forex trading.
1.Fear of failure/ loosing money
This is the most common fear that Forex traders experience. It could be because most traders go through a lot of losses due to jumping into investing in the markets without proper education and being misinformed. And because of that, by the time they acquire knowledge, they are already numb and carrying the memories of their past losses and it’s hard to let go of the past. Let go of the past and focus on the current and the future.
When you approach the Forex markets with these kinds of emotions and thoughts, you are setting yourself up for failure. It is hard to believe in your Forex trading strategy or plan if you are a scared being.
There is no formula that I can give anyone who is feeling scared every time that they enter the markets besides telling them that they must face their fears (of course it is a different story if I am coaching you because we do coaching sessions until you manage to overcome the fear) . Fear is normal and it does subside with time. The more you are active in the markets, the more you get comfortable. You just have to do it consistently.
It is also difficult to face the unknown. The best way is to start by identifying what really scares you. If it is the past losses that are scaring you, start by finding out what caused the past losses and fix that. Once that is done, you can then work on avoiding those mistakes by doing things differently this time around. If you still find it difficult to identify the issue , you definitely need a mentor to help you clear your path and identify that. You can check out my mentorship program HERE.
2. Fear of missing out
This type of fear happens when you do not have a clear understanding of how do you trade and why do you even trade. Most people who are Forex traders are still finding it so hard to plan for their Forex trading sessions. Some people are even unaware that it can be done. Most people still need to unlearn that as a Forex trader,you are supposed to be glued to your screen and stay up all night babysitting trades and have zero life outside of the markets.
Then there are those Forex traders who understand that they can actually draft a Forex trading plan and follow it (which is great, I do that as well and that’s what I teach my mentees to do).
The challenge though is learning to be content. If you find yourself being too busy at work or in your business to sit down and trade according to your plan, you are likely to feel like you are missing out on some great trading opportunities and that could be very frustrating. When you feel frustrated, chances are, you’ll enter the markets too late and loose. Again, there is nothing that I can say besides that one needs to understand that a missed trade is never a loss. There is so much power in understanding that.
If for some reason you could not sit and trade during your planned session, there’s always going to be other opportunities. Also understanding that when you don’t do any activity in your Forex trading account, you will never come back and your money has disappeared. That can happen though if you are trading with unregulated brokers. It is so important to trade with regulated Forex brokers. It is for the safety of your funds.
3. Fear of success
This is the most confusing type of fear for most people and it took me so long to understand it as well. It is confusing because no one in their right mind would intentionally feel scared to be successful. We all want to be successful. The reason why you are even trading and reading on this blog is because you are looking for ways and tips to be successful in Forex trading. So,there’s definitely no way that you can trade and be fearful of success but it happens, and it happens a lot.
With my mentees or the traders that I coach, I have realized that most of them are sabotaging themselves by “running” away from excellent trading opportunities and they’ll make all kinds of excuses why they are always identifying great trading opportunities but they never act on them or they take on demo. As a result, they are mostly making money on demo and when they eventually do take the same trades on live account, they always take the wrong ones.
The fear of success is very difficult to identify because it does not happen consciously but it happens in our subconscious minds. I believe that Forex trading is more of a “work on me first before focusing more on strategies” kind of business.
On a day to day basis, I speak to different individuals who are struggling with Forex trading. I can tell you now that most of the failures are not about trading strategies but are about how the person thinks and how they handle their emotions and self control being the number one cause of failure. With some Forex traders, it is just a feeling of not being enough or thinking that making money is for certain people (more of these lessons on my mentorship program)
I hope you found this post valuable, please kindly share so it can reach more Forex traders. Please leave a comment and share if you can identify with any of the fears mentioned above. If you wish to receive my next publication direct to your email, you can subscribe and your confirmation email could be on spam if not on inbox. Thank you for stopping by.