There’s a saying that the psychological challenge makes up 90% of the struggle in making consistent success as a forex trader. But this statement is both true and false. Many great traders who shared their experiences had discussed how their inner psychological struggles had built losses, even when they knew that what they were doing was wrong. Also, there’s no doubt that psychological factors play an important role in trading forex or speculating on anything.
Mastering trading psychology won’t produce any money, but if people are not aware of the tricks the mind is trying to play, they will find themselves losing even if they are good traders and in their right decisions.
Mental Trading Mistakes
- Not believing in the methodology
Surprisingly, many people trade without being convinced they can gain money or have a good chance. And the best way to fight the doubts is for traders to check their methodologies. For instance, if they follow trends, they must take time to backtest on a lot of historical data. If it shows good results most of the time and is based on a solid concept, traders must believe in what they are doing.
- Making a plan and sticking to it
The secret here is, it’s not about making a plan. It’s about having plenty of them and leave some flexibility there too. Let’s say traders are day trading; they must have a method to decide each day which currency pair or pairs they are going to trade. But if the pair they chose goes nowhere, and the other pair took off, they might want to reconsider their decision instead of sticking to the plan. What they could do is to give themselves an option to change their minds every 1 hour. Though this is a plan, it must include some structured flexibility too.
- The difference between planning and living
It’s easy to make a plan, but it is a whole different story living the plan. Traders will likely feel different after spending weeks or months losing real money again and again while seeing the account balance shrink. There is no perfect answer to this dilemma. Traders just need to be aware that going through months of time in an hour or so is not necessarily a good practice psychologically for bad trading times.
- Afraid taking a trade or too eager to trade
Here, these are the opposite sides of the same issue. The best way to get through this is for traders to believe that they are ready to take either several trades or no trades at all. Then, they must think that what they do will depend entirely on the market condition instead of the state of their wallet or mood. Some days have no action, and days with many actions; traders need to adapt to the events.
- Dealings in the market
Thinking that if the price will increase another 10 pips, or if it doesn’t in the next hour, traders will get out of the trade. But remember that this is just the mind running with its anxiety and talking nonsense. Don’t listen to it, hold firm, and exit trades according to the plan.