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Psychology of Forex Trading

Dec 18, 2016 at 08:03
Vues 7,654
290 Replies
oscarbc
forex_trader_370637
Membre depuis Oct 21, 2016   posts 9
Mar 26, 2017 at 07:32
In trading there is a small minority of winners and overwhelming majority of losers, and the latter will surely want to know the secrets of the success of the winners. But is there a difference between them? Yes, there is: the person earns money week by week, month by month, year by year, trade maintaining self-discipline. To the question about the secrets of their triumph, such winners answer without vascilar, that were able to reach those heights, when they learned how to control the emotions and to change the decisions, to equal the market.
Membre depuis Dec 11, 2015   posts 1487
Mar 26, 2017 at 11:11
gustabofx posted:
The factor that motivates the trader to perform operations is the hope of making a profit. If hope prevails over the calculation, the trader runs the risk of overestimating his abilities when analyzing the situation. Hope must be in subordinate relationships with calculation and greed.

That is a great way of putting it, I think. One must always follow the market, rather than hope that the market will do what they want it to do.
Membre depuis Nov 15, 2015   posts 56
Jul 22, 2018 at 12:51
The true key of success trading is simply doing nothing most of the time just set your targets and leave the market play
Membre depuis Aug 27, 2017   posts 994
Jul 23, 2018 at 06:40
Monnex posted:
The true key of success trading is simply doing nothing most of the time just set your targets and leave the market play


It’s not easy to do so; and I see pro traders have huge knowledge & experience and only then can enjoy this profession; without proper knowledge there is no way.
Membre depuis Nov 15, 2015   posts 56
Jul 23, 2018 at 10:07
yeah it's not easy that's why most traders still loosing money
Membre depuis Aug 18, 2018   posts 10
Aug 23, 2018 at 11:02
Adribaasmet posted:
Monnex posted:
The true key of success trading is simply doing nothing most of the time just set your targets and leave the market play


It’s not easy to do so; and I see pro traders have huge knowledge & experience and only then can enjoy this profession; without proper knowledge there is no way.

Absolutely right! it seems easy but actually it is very hard. Forex is a battle which can be win only with knowledge.
Membre depuis Aug 20, 2018   posts 9
Aug 26, 2018 at 06:16
Interesting point about doing nothing most of the time. That concept helped me to. I taking about 10 trades a day and thoguht that was normal but it was over trading. I cut this down to only 3 a day max and found that it made me wait for the best opportunties
Membre depuis Aug 27, 2017   posts 994
Aug 26, 2018 at 10:18
ChenChenGu posted:
Interesting point about doing nothing most of the time. That concept helped me to. I taking about 10 trades a day and thoguht that was normal but it was over trading. I cut this down to only 3 a day max and found that it made me wait for the best opportunties

How can you go with a fixed number; since sometimes there have no good entry point? What do you do actually mainly on this kind of session?
Membre depuis Nov 15, 2015   posts 56
Aug 26, 2018 at 10:28
In my opinion, there is no target of trades you must open every day, it depends on your strategy and what i mean is to do nothing is for to set your plan plus trades and forget them
Membre depuis Aug 27, 2018   posts 9
Aug 27, 2018 at 12:19
I think what ChenChenGu meant was that they open UPTO 3 per day. So they can take 0 , 1 , 2, 3, but not 4 or more
Membre depuis Jul 10, 2014   posts 1117
Aug 27, 2018 at 16:54
Plan your trading according to your strategy and follow that plan in detail, don't trade impulsively or randomly - that alone helps with the anxiety provoked by trading.
Membre depuis Aug 16, 2011   posts 110
Aug 28, 2018 at 12:43
Here are my thoughts on psychology of forex trading...


The biggest battle a trader has is not with central banks, not with brokers, and not with trading algorithms, it is in fact your inner voice and your trading mindset. Many traders burn out due to the fact that trading is an intense psychological battle of fear and greed and trying to preempt market behavior. Don't worry, even professional traders get it wrong more than they get it right!

A great analogy, and as covered in the chapter on ‘Reality of Trading’, is that of professional golfers, only a very small percentage make a rock-star living from it (approx 0.5%) whereas a few have a comfortable lives (approx 1.5%), even more break even (about 12%) and the rest are mediocre and do not make enough money to get on the radar (majority). Same is true for traders and unlike what many forex marketers promote, trading for a living is a tough gig.

Saying that, trading does not prejudice, does matter your race, your religion, your wealth or even your education, all traders are equal and you are pretty much only as good as your last month.

A healthy respect for the markets is essential and you need to take responsibility for your actions - not everyone gets it right all the time and knowing when to fold and cut your losses is essential as the market may not come back in your favor and it is better to take a 10% or 20% loss than risk being liquidated and losing 100%.

Some questions to ask yourself...
How far are you willing to let a losing trade go against you? (what is the maximum level of draw-down you will accept?)
What win/loss ratio do you expect you will have trading with real money?
Are you prepared to stay up staring at screens half the night to wait for a position to come back into profit from loss?
Can you handle stressful situations where markets are volatile and unpredictable?
Do you realize the difference of trading a demo account to a real money live account?

The biggest aid to your trading mindset is a trading plan and this should have if-then scenarios so that the psychological impacts are minimized as you have a pre-defined plan of action.

The core and underlying driver of trading psychology is FEAR and GREED. Trading decisions are made based on either the fear of losing/risking money or the greed associated with making a profit. This is seen all the time in the timing of the exit and entry of a trade and can take the form of entering & exiting trades too early or too late. Self doubt is the byproduct of the fear and greed foundation and is a constant nagging voice in the back of the head of a trader that questions all aspects of the trading psychology.

So the biggest battle faced by a trader is not the large banks, it is not the brokers, it is not other traders, it is not the central banks, it is themselves.

Handling stress is the next major obstacle that traders need to manage. If a trade goes against a trader then of course stress is going to come into the equation, if a trader has full belief in his/her system then of course the faith in the system should reduce the stress levels applied, however due to the uncertainty of the markets there is always going to be some level of stress, especially when the trade size and consequent risk is applied.
Membre depuis Aug 29, 2018   posts 10
Aug 29, 2018 at 14:19
Great comment. I found it very helpful. I will trade a bit differently now
Membre depuis Apr 06, 2018   posts 254
Aug 29, 2018 at 14:41
camerongill posted:
Here are my thoughts on psychology of forex trading...


The biggest battle a trader has is not with central banks, not with brokers, and not with trading algorithms, it is in fact your inner voice and your trading mindset. Many traders burn out due to the fact that trading is an intense psychological battle of fear and greed and trying to preempt market behavior. Don't worry, even professional traders get it wrong more than they get it right!

A great analogy, and as covered in the chapter on ‘Reality of Trading’, is that of professional golfers, only a very small percentage make a rock-star living from it (approx 0.5%) whereas a few have a comfortable lives (approx 1.5%), even more break even (about 12%) and the rest are mediocre and do not make enough money to get on the radar (majority). Same is true for traders and unlike what many forex marketers promote, trading for a living is a tough gig.

Saying that, trading does not prejudice, does matter your race, your religion, your wealth or even your education, all traders are equal and you are pretty much only as good as your last month.

A healthy respect for the markets is essential and you need to take responsibility for your actions - not everyone gets it right all the time and knowing when to fold and cut your losses is essential as the market may not come back in your favor and it is better to take a 10% or 20% loss than risk being liquidated and losing 100%.

Some questions to ask yourself...
How far are you willing to let a losing trade go against you? (what is the maximum level of draw-down you will accept?)
What win/loss ratio do you expect you will have trading with real money?
Are you prepared to stay up staring at screens half the night to wait for a position to come back into profit from loss?
Can you handle stressful situations where markets are volatile and unpredictable?
Do you realize the difference of trading a demo account to a real money live account?

The biggest aid to your trading mindset is a trading plan and this should have if-then scenarios so that the psychological impacts are minimized as you have a pre-defined plan of action.

The core and underlying driver of trading psychology is FEAR and GREED. Trading decisions are made based on either the fear of losing/risking money or the greed associated with making a profit. This is seen all the time in the timing of the exit and entry of a trade and can take the form of entering & exiting trades too early or too late. Self doubt is the byproduct of the fear and greed foundation and is a constant nagging voice in the back of the head of a trader that questions all aspects of the trading psychology.

So the biggest battle faced by a trader is not the large banks, it is not the brokers, it is not other traders, it is not the central banks, it is themselves.

Handling stress is the next major obstacle that traders need to manage. If a trade goes against a trader then of course stress is going to come into the equation, if a trader has full belief in his/her system then of course the faith in the system should reduce the stress levels applied, however due to the uncertainty of the markets there is always going to be some level of stress, especially when the trade size and consequent risk is applied.
Very well said.
The market will trade through it’s path of least resistance .
Membre depuis Aug 22, 2018   posts 10
Aug 30, 2018 at 12:48
A very good post @camerongill. Thanks for sharing here.
Membre depuis Aug 21, 2018   posts 12
Sep 03, 2018 at 10:59
@camerongill
My respect. It is such a good one!
Discipline rules, not emotions.
Membre depuis Sep 03, 2018   posts 19
Sep 03, 2018 at 13:40
Totally agree with you man. Very good post indeed.
Membre depuis Aug 29, 2018   posts 10
Sep 03, 2018 at 14:41
Is trading psychology really that important? I place much greater importance to money management and strategy optimization
Membre depuis Apr 06, 2018   posts 254
Sep 03, 2018 at 14:56 (édité Sep 03, 2018 at 14:56)
LikeMustard posted:
Is trading psychology really that important? I place much greater importance to money management and strategy optimization

Trading psychology is most important part of trading because when money is involved human become emotional and a trader unable to execute his trading plan 100% due to greed and fear. If you can not execute your trading plan due to your psychology then even a robust trading system will fail to earn money for you.
The market will trade through it’s path of least resistance .
Membre depuis Sep 03, 2018   posts 19
Sep 16, 2018 at 06:22
LikeMustard posted:
Is trading psychology really that important? I place much greater importance to money management and strategy optimization

I agree with @LongVision
Trading requires mind, unfortunately mind can be easily distracted in many ways. With such distractions affect the trades badly. So it's important to have sound psychology. You will need emotionless mind so that you won't be distracted with that you FEEL, clearing out the way to decide whatever your strategy says so. Though it's not possible to be completely emotionless but one must avoid greed, fear, anger, laziness, hurry, stress, revenge...

Your son didn't do anything wrong but if you're angry, he will be upset. Your brother didn't do anything wrong but if you're greedy, he started to hate you. Like it or not, trading is your spouse. 😁
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