Forex Trading Psychology

This is not often understood by those new to trading. It is expected, not to say a sign of maturity, that we can exercise our will power and do what is needed, subject to it being physically possible. Yet if you gave the same trading plan to 100 different traders, every one of them will give you a different outcome because of hesitation in execution, or second-guessing the plan, or some other deviation.

The business of trading for a living puts you under a kind of stress that you will have seldom experienced in other aspects of life, and requires a level of fitness even when you are basically sitting still. Physical exercise greatly improves both mental and physical health, lowers blood pressure, helps you combat stress and think more clearly especially in adversity.

It assists tremendously to keep a trading log that records both your trades and your emotional condition. Some would say that it is essential. This can provide you with an early warning that things are not working out emotionally, provided you are scrupulously honest in filling it out. But even this may not save you if you are feeling under the weather, or you are tired. Trading requires you to be on top of your game in every aspect, as you are dealing with the potential for large financial losses in a short period of time.

Sometimes the markets will not seem to cooperate. This can arouse all sorts of other emotions, particularly if you have had several losses and feel that you "deserve" to win this time. The market is bigger than any individual trader, and doesn't care if you feel you are "owed" a win because of past history. If you find that you are becoming emotionally involved with your trades in this way, then it is time to step back and get some perspective on the situation.

Trading is counter intuitive. No matter how good your trade selection, inevitably you will have a share of losers, and it is natural to beat yourself up about them, wondering what you did wrong. The answer to this is that you may have done everything perfectly, but that is not what your mind will be telling you. It is easy to conjure up scenarios where you will be hard-pressed to exercise your will power, concentrate, and do the right thing, purely because of the foreign nature of trading.

It's okay to stop trading, close your open trades, and call it a day. If you miss an opportunity for profit, there is no problem as there will be other opportunities tomorrow. It is much more of a problem if you insist on keeping going despite the fact that you are not trading your strategies efficiently, and consequently blow your account. If you recognize trading for the effort that it is, then you will appreciate that sometimes you need to take a break.