You get a good looking forex trade signal, enter it and suddenly it’s rfeversing, you’re 50 pips + down in the blink of an eye. You panic and close out for the loss. 20 seconds later the market changes again and the trade ends as a 100 pip profit…what went wrong?
Forex trading successfully is as much about the right mental approach as it is using the right system. If you’re not mentally well prepared then no matter how good your signals are you’ll lose badly. It’s a fact that 2 traders using the same system and signals can have totally different results and the reason is purely psychological.
Why? Well, even when setting interest rates and other actions that influence inflation, the largest governments have limited immediate impact on exchange rates. The Forex markets are simply too large - $2-3 trillion daily - for any one player to dominate the action.
Trading strategies, which are essential, can increase the odds of making profits and help minimize or avoid losses. They give the you that thin edge that can make the difference between winning and losing on a given trade, or over time.
Forex is fast-paced, complicated and requires a well-thought out game plan. That game plan has to be executed with nerve and skill. To trade successfully in a demo account for several weeks is essential but can lead to unwarranted confidence. Traders who invest Monopoly money will often take chances, leading to successful trades, that they wouldn’t dream of taking with real money.
Real success requires answering honestly a number of questions that can be difficult to answer objectively when the subject you! What are your financial goals? Looking for a quick buck? Seek elsewhere. You will have losses that wipe them out. Looking for secure, low-risk capital accumulation? Look elsewhere.
Forex trades can be simultaneously a stimulating brain teasing game and an exciting adventure. The thrill of victory! The despair of (temporary) defeat! Understanding the complexities of Moving averages, Parabolics , Fibonacci retracements , Stochastics and so on is all part of the crazy Forex game!
As a result, you will need to be very honest with yourself and decide how and if you are prepared to deal with pressure and fear. Even professional traders do not have any certain system of ensuring profits and avoiding losses.
The pressure of deciding when to buy and when to sell is many times larger than in stock trading. The fear of loss is greater, in part because of the amplification provided by 100:1 or larger leverage.
Even winning can be problematic. With practice and persistence, provided you don’t quit too soon or run out of money too quickly, you will have periods when it all seems laughingly easy. That can lead to euphoria, which is great. But it can also lead to cockiness, which is fatal. Nothing will wipe you out quicker than arrogance. Confidence is essential, vanity is suicidal.
One bit of advice - If it gets too much and you’ve had a real bad run. Take some time off to reflect and analyse where it went so bad. Then - and only when you’re ready come back soft or dummy trade to get the feel back again.
The other side of the coin to be avoided is too much second guessing. Successful forex requires bold moves based on sound judgment and confidence. Every decision is a small leap of faith, since no one can know in advance for certain what the outcome will be. Probability of one degree or another is the best that can be achieved.
All this will be accompanied by the fear of loss of money, which often leads to panic selling in the face of what would have been a temporary price movement. It is of such panics that depressions are made, both economic and psychological (witness the madness that is the credit crunch for the best example of this in 80 years)
Forex trading can be a wild ride BUT if you have serves of steel, are not prone to ulcers plus a decent math brain plus a strategy that you’re comfortable with then you’ll do well and likely make way more money than any normal job.
Want to get rid of forex trading screw up emotion?
Have a look at Forex Autopilot and Forex Killer and test them out - both have free trials and very impressive backtest track records so why not have a look at least.
