Trading in the forex market is more than knowing a few charts and indicators. Every forex trader worth their salt knows that there are two elements that make a successful trader: The technical side and the fundamental side.
Today, we’re delving into the fundamental side: the psychology of forex trading. We’ll reveal a few insights and strategies any beginner can use to find his footing in the forex market.
1. Emotional Control.
First of all, emotions are a big part of trading the forex market. As a trader, you’ll have days where you’ll make money and days where you’ll lose money. You’ll have days where the market favours your strategies and days where the market laughs at your strategies. And you’ll certainly have days where the market has you sitting down wondering why you’re even a forex trader.
It’s important to understand that you shouldn’t let those emotions get to you. You’re trading in a market made up of billions of people, determined by the movements of entire national currencies. It’s only natural that things won’t always go the way you’d planned.
And if you don’t understand that, then don’t be a forex trader.
No matter what the market does or says, it’s important to remain composed. If you lose money, instead of turning your house upside down and scaring your neighbours, take the time to sit down and analyse what happened and where you went wrong.
Understand what changed in your market, or the specific reason your trading day didn’t go as planned. Then note down what happened and the best solution to solving that issue, so the next time it happens, you’ll be prepared.
It goes without saying, but I’ll say it all the same: When trading in the forex market, don’t use an amount of money that’ll send you into depression if you lose it. It’s always recommended that you start small. Use a small amount of money, not your life’s savings.
It’s easier to control your emotions with trading when you know you won’t lose. At least, not lose much.
2. Great Expectations
It’s OK to have goals as a forex trader (and it would be concerning if you didn’t). But it’s also advisable to not have goals that are, for lack of a better word, impossible.
Because why would a trader just starting out want to make ten million dollars within one month? If that’s your goal, go to Sportybet.
Your chances of making it there are less than 0.1%, but at least they’re not zero.
Instead, set achievable goals you can commit to. Ten million dollars in ten years is a hard goal, but it’s certainly not impossible, especially if you stick to learning and trading well each and every single day.
Yes, including weekends. Just because the market is taking a break doesn’t mean you should, too.
It’s recommended to shorten your long-term goals into smaller, more achievable goals. Making 10% profit in the market, for example, within a month or two isn’t a bad goal.
As time passes and you get better as a trader, you can increase your goals and aim higher.
That way, not only are your goals achievable, but they’re adjustable to your progress. Having flexible goals is key in a flexible market.
3. Discipline.
If you can’t be a disciplined trader, you cannot be a successful trader.
Every successful trader has one trait in common: consistency.
And to build consistency, you need to build discipline.
It’s not hard to build it, either. All you need to do is constantly trade, create strategies, observe patterns, learn from your losses and keep track of your wins. Every single day. For months at a time. So long as you do so to the point where it’s a habit, you’ve automatically built discipline.
It seems like a simple concept, but it’s the most crucial difference between ordinary forex traders and successful forex traders. If you don’t want to be a successful forex trader, don’t be disciplined.
4. Patience
The forex market is an unpredictable market. If you trade anyhow you like, the market will treat your money anyhow it likes.
So before you trade. Breathe.
Calm down.
Be patient.
Strategize your trade.
Be sure you trade right.
And after you trade?
Breathe.
Calm down.
Be patient.
Check your trade every once in a while, and based on what you see, decide what your most profitable move should be.
And do that.
When you make a profit?
Breathe.
Calm down.
Be patient.
Take your profit and re-strategize. Should you hold your position? Should you exit the market? Decide what your most profitable move should be.
And do that.
When you make a loss?
Yes. Still Breathe.
Calm down.
Be patient.
Analyse what went wrong. Decide on how best you can fix that. Note it down so you remember what to do next time.
No matter what happens.
Breathe.
Calm down.
Be patient.
5. Learn From Your Losses.
Before you start trading, know this.
You will lose.
You will lose money. Some strategies won’t work. The market will change. It is inevitable. If you don’t want it, don’t be a forex trader.
Every successful trader has lost a sizeable amount of money before. The difference between them and unsuccessful traders is that they learnt from their mistakes. Some of them will even tell you that it’s what they learnt from their losses that made them successful.
We’ve said it before, but it’s worth saying again. Whenever you lose money, don’t start tearing your shirt.
Take the time to calm down. Find out what happened. Ask what went wrong? Did you apply the strategy at a wrong time? Did the market throw you a curveball? Could it have been prevented? How do you avoid it from happening again?
Once you’ve answered those questions, note it all down. Everything that happened, what went wrong, and what you need to do to prevent that next time. You can even ask a more experienced forex trader for their opinion, and note it down, too.
Always learn from your losses. Or you’ll be doomed to making the same mistakes again and again and again and again.
And that’s the definition of madness.
As a final note, there are other things to know before you start trading. But these five are the most important, most crucial, most fundamental things to know and to implement as a beginner in the forex market. Do these right, and you’ll be well on your way to increasing your profits and becoming a successful forex trader.
Stay strong on your journey through the forex market.
And don’t tear your shirt.
