Trading Forex is as much about learning to control your emotions as it is about interpreting price movements in a currency pair. Trading psychology is something that is often overlooked, with many believing that you should learn to trade, and then fine tune what you have learnt through emotional control. In reality, one cannot be learnt without the other, and from day one Forex traders should be looking to gain insight into how their emotions affect their trading. Below are a few key psychological traits that any trader must possess in order to be successful.
Patience In Forex
The first is patience. A Forex trading strategy, when implemented correctly, is designed to give a trader an edge in the Forex markets. It can be broken down into a series of rules that must be adhered to if the strategy is to retain that edge. As Forex traders it can be easy to break the rules of a strategy in order to enter a trade, especially if the market has not offered any true setups for a while. This can lead to random entry, which can lead to losses. You must be patient enough to wait until an opportunity presents itself, as defined by the rules of your strategy, and only then consider entry.
Objectivity In Forex
The second is objectivity. You must be able to take a loss without it affecting you emotionally. All Forex strategies involve losing trades, some strategies involve more losing trades than winning trades. The key to long term profitability is ensuring that the amount you lose in the long term is less than the amount you gain. Don’t focus on the losing trades, take them as given and move on. If you let them affect you emotionally, and carry that emotion into your next trade, you could end up making irrational trading decisions that will diminish the effectiveness of your strategy.
Humility in Forex
Finally, humility. Forex markets move as a result of an almost unlimited number of factors all acting upon them at once. As detailed as your analysis is, there is always the chance that one of these factors will cause price to move against you and stop you out of your trade. This does not mean that you are a losing trader, in the same way that winning one trade does not make you a winning trader. Successful Forex traders realize that there will always be a level of uncertainty in Forex markets, and build risk management principles into their trading strategy to account for it. A wise trader once said, “The market is always right; sometimes, so is your analysis.”
To achieve long term profitability in the Forex markets you must ensure that you implement your strategy with these psychological qualities in mind. While just being in control of these three emotions will not guarantee success, it will guarantee a level-headed and sensible approach to the markets. In an activity such as Forex trading, where you are always competing against others for your profits, such an approach can give you the edge you need to stay on top.
Get a free Forex PDF PLUS:
- 14 Video Lessons
- Free One-on-One Training
- A 5000$ Training Account
- In-House Daily Analysis
- Get FULL ACCESS