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The psychology of Forex trading


The financial market is rich in opportunities that are available to anybody who is interested in earning money. Many traders succumb to the impulse and rush into the pool with their heads, making rash transactions, not supported by either analysis or even common sense. As a result, financial losses are huge and dissatisfied traders are becoming more and more numerous. And it was worth only to take a more responsible approach to this issue and maybe there would be no loss at all, and Forex would become an ideal platform for making substantial profit.

Basic concepts


Psychological factors are important when entering the financial market and not all participants are aware of this, and they even don’t try to understand this. Human beings are such creatures that a number of situations can bring them of balance: cause aggression, put them into a stupor, catch a panic, give hope, envelop a web of irresistible laziness. With such an attitude, counting on positive financial results from working on Forex is stupid. But in order to defeat the "enemies" of the trader, you need to know them by sight. Just today, we will get to know some “vices”.

Laziness


In order to get positive results from trading on the financial market, it is necessary to spend not a single month (and sometimes even a year) on education and training. Everything is like at school: first, theory and only then practice. Yes, it takes a decent amount of time because no one promises instant success.

Moreover, at first it may seem that everything is simple and clear, and newcomers, as you know, are lucky. Thus, having received the first positive results, the novice trader is lazy to continue the practice and further learn about the nuances of trading and goes to the real market, where he inevitably faces a number of troubles.

The blame for all is human laziness, which interferes not only when working on Forex, but, in general, in any business. You can overcome it only if there is a worthy goal. In the case of Forex trading, the goal is more than worthy - the market favors only those traders who are aware of the need for work and are fully committed to the profession of a trader. So, you need to start the path of a trader on Forex with the fight against the first vice - laziness.

Fear


As soon as laziness is overcome and, it would seem that much has been studied and practiced, the trader is faced with a new problem - increasing fear. As a rule, it arises directly upon the decision of a trader to leave the demo account and switch to trading on the real market. In this case, fear is easy to understand.

The demo account is a training site that completely (or almost completely) repeats the working conditions on a real account with the main difference being that virtual funds are used there, not real money. Thus, a trader has the opportunity to learn how to trade without risking real money and can safely make mistakes by testing various strategies, operating with a wide range of trading assets, using a variety of technical indicators, etc. Yes, a trader can train on this account an unlimited amount of time. But don’t play in it too long, it will be more difficult to switch from a virtual platform to a real one. At this moment, fear begins to work.

The most important of all the possible fears on the path of a novice trader is not making mistakes, but the loss of funds. And this means that, fixed on the fact that funds may be lost, the trader involuntarily begins to make a number of mistakes, act completely non-rationally and, of course, lose money as a result. Beginning traders in the Forex market need to remember and accept the fact that the loss of money is quite possible, because no matter how expert a trader is, the market is unpredictable and can go against all common sense. Therefore, it is important to minimize losses using money management. The trader must know the possible risks and learn to reduce them, while overcoming the fear of losing funds.

Panic


Having not learned how to deal with their fears, traders get into a trouble called “panic”, a condition in which fears can no longer be controlled and mistakes are made one after another.

Often panic occurs among traders who adhere to new strategies. So, expecting the release of specific news and predicting the movement of an asset in a certain direction, the trader falls into a panic if the market moves in the opposite direction and he has to take rash decisions. In this case, it is worthwhile to understand that the “rule of the crowd” is in effect here, which means that the situation can be aggravated even more if one makes an ill-considered decision following the crowd.

As the experience of practicing traders shows, non-standard situations unsettle many people and only after the lapse of time speculators understand that it would be better to stay inactive in a particular situation than to flog a fever, it’s rare when spontaneous decisions bring a positive result on Forex.

Not a bad option to calm your shaky psyche is to temporarily move away from trading. Especially if the decision was made incorrectly, and the financial result became unprofitable. It would not hurt a trader to return to the demo account for a while and try to understand where the mistake was made, and whether it was possible to avoid it at all. Remember, only one who does nothing is not mistaken.

Hope


Often, traders have an unjustified sense of self-confidence, where there is no place for experience and sober calculation, and there is only a blind hope for a successful transaction. Such feelings often haunt gambling participants, binary options speculators, and casino patrons. That's where the analysis is neglected, but they hope for luck.

Forex is not the place where the hope of becoming a millionaire having made a couple of successful transactions can prosper. Here, without a strict calculation, one cannot budge. This is what distinguishes traders who choose Forex trading companies from those who prefer cooperation with binary options brokers. In the second case, it is quite possible to make a profit by making thoughtless transactions, betting on “higher” or “lower” and the word “win” is really appropriate here. On Forex, with such an approach, counting on profit is stupid.

Another manifestation of hope at Forex is when a trader tries to save a knowingly unprofitable transaction by adding funds. Yes, there are cases when the price is really correcting and the trader remains in profit, but without a thorough analysis it is impossible to make such decisions at random. By the way, often managers of not-so-honest brokers actively use this tactic, managing the funds of inexperienced traders and insisting on adding additional funds, supposedly to support the transaction, because the price is about to change. Remember, only you have the right to decide how to manage your funds and you must not follow the advice of financial advisors, because they are, first of all, broker’s associates.

Tips for Beginner Traders


In conclusion, it is not superfluous to give some advice to traders who are just starting to trade in the foreign exchange market:

And finally, we recall that the quality of trading largely depends on the broker chosen for cooperation. That is why we urge you to take a more responsible approach to the question of choosing a brokerage company, and on our rating, traders can make a comparison of a number of forex brokers and choose the most optimal option for cooperation.

Author: Kate Solano, Forex-Ratings.com

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