It may not seem immediately obvious when you first starting trading forex, but psychology plays an enormous part in determining whether or not you will ultimately make it as a profitable forex trader. If you can control your psychological feelings and emotions, then you have won half the battle.
Of course you also need to find and apply a profitable trading system, but if you can do that and are disciplined enough, then you can make substantial profits from trading. So what do we actually mean by psychology, and what part does it play in a forex trader’s everyday life?
Well psychology is basically all about the mind and how different events in our lives affect how we think and how we subsequently react. So in a trading sense psychology refers to how we, as traders, react to things like losing trades or why we make impulse trades based on gut instinct, for example.
To be successful in this business you need immense discipline and that means having full control over your psychological influences. So therefore once you find a profitable trading system, you should stick to this system rigidly and never deviate from it at all, even if you experience a few consecutive losing trades. It’s very easy to try and chase your losses, or increase your stakes to make up for previous losing trades, but this is to be avoided at all costs.
Similarly if you experience a strong sequence of winners you must still have control over your psychological feelings. So just because you have a few winners does not mean that you are suddenly a world-class trader or that you are ready to dramatically increase your leverage so you can make even more money. It simply means you have had a good run which should be expected with a solid trading system.
Discipline is everything in forex trading. You need a solid trading system that uses controlled stop losses and you need to strictly apply good capital management. However all this is useless if you have no control over your psychological feelings.
It can be very hard sitting at home staring at your screen all day on a psychological level and it can be very difficult dealing with any losses that you may incur, but you have to be in control of your emotions at all times. If you keep plugging away with a solid workable system then you should start to reap the rewards if you can control the negative and impulsive thoughts that enter your mind at various times of the day.
