Trading in the foreign exchange market is not just based on the fundamental or technical analysis; in fact it's much more than that. You must have witnesses the scenarios where the market moved in the opposite direction after the data release, or even ignored its technical points due to strong fundamentals.
There is more of a psychology involved in this market that plays a key role in driving the movement of the market, where many make profits while many lose because they could not get hold of their emotions - greed and fear. There are a few psychological phases that every trade goes through with, understanding of which could help you curb your losses and trade green more often.
1 - The Research Stage
It's of no wonder that before getting his hands on the new Forex trading account, a trader undergoes some research to have an idea what trading is all about in the foreign exchange market. He consults books, online tutorials, and even videos to get know how about the subject and before even getting done with it he starts trading.
It's of no wonder that before getting his hands on the new Forex trading account, a trader undergoes some research to have an idea what trading is all about in the foreign exchange market. He consults books, online tutorials, and even videos to get know how about the subject and before even getting done with it he starts trading.
2 - Early Success and Earlier Failure
Yes, absolutely. Before even getting done with reading, a trader starts trading big sums of money on the demo account where he enjoys healthy profits most of the time that compels him to trade in a live account. And he does so immediately without having proper knowledge and trading strategies, which causes him to lose his hard-earned money instantly because the sentiments change when you trade in a live account.
Yes, absolutely. Before even getting done with reading, a trader starts trading big sums of money on the demo account where he enjoys healthy profits most of the time that compels him to trade in a live account. And he does so immediately without having proper knowledge and trading strategies, which causes him to lose his hard-earned money instantly because the sentiments change when you trade in a live account.
3 - Donation Continues
After losing some money at the very start, the trader gets back to the reading material and consults others for their expert advice that often proves to be ineffective; hence the trade continues losing money. This stage repeats itself for at least a couple of times after which a trader realizes that he should come up with his own tried-and-tested strategies that suit his own style of trading.
After losing some money at the very start, the trader gets back to the reading material and consults others for their expert advice that often proves to be ineffective; hence the trade continues losing money. This stage repeats itself for at least a couple of times after which a trader realizes that he should come up with his own tried-and-tested strategies that suit his own style of trading.
4 - Still in Doldrums
After devising a few but shallow trading tactics, a trader gets back to his live account and realizes loss again, and this is the time where most of the traders get dejected and quit trading as they think of it as a waste of time and money.
After devising a few but shallow trading tactics, a trader gets back to his live account and realizes loss again, and this is the time where most of the traders get dejected and quit trading as they think of it as a waste of time and money.
5 - Back to the First Stage
At this stage, the trader resolves to avoid trading on his live account until and unless he gets a proper trading plan and strategies that are consistent in giving him profitable results. Therefore, he shifts back to the first stage where he tests his tactics on the demo account and makes sure that they are reliable.
At this stage, the trader resolves to avoid trading on his live account until and unless he gets a proper trading plan and strategies that are consistent in giving him profitable results. Therefore, he shifts back to the first stage where he tests his tactics on the demo account and makes sure that they are reliable.
6 - Slow but Consistent
Having enough confidence on his trading plan, he tries them on his live account again but this time he has his trades green. However, he still remains hesitant with implementing those strategies blindly so he further discusses them with experienced traders and on online trading forums. This does not only build up his confidence but also highlight the pitfalls and other areas that needed to be worked on for much better results.
Having enough confidence on his trading plan, he tries them on his live account again but this time he has his trades green. However, he still remains hesitant with implementing those strategies blindly so he further discusses them with experienced traders and on online trading forums. This does not only build up his confidence but also highlight the pitfalls and other areas that needed to be worked on for much better results.
7 - Go Get It
Eventually after learning from his own mistakes and losing some money, he has a proper trading plan having few, but yielding trading tactics that also abide by the rule of trading discipline. Profits start coming in gradually as the grips on it get stronger by the time, resulting in making him a professional and disciplined trader who makes substantial amount of profits consistently.
Eventually after learning from his own mistakes and losing some money, he has a proper trading plan having few, but yielding trading tactics that also abide by the rule of trading discipline. Profits start coming in gradually as the grips on it get stronger by the time, resulting in making him a professional and disciplined trader who makes substantial amount of profits consistently.
So, the earlier you understand these psychological phases and mistakes a common trader generally makes, the better it is for you as you would be keeping yourself from losing the confidence and as well as money at the beginning.
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Article Source: http://EzineArticles.com/?expert=Rimantas_Petrauskas
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