It is often said that trading psychology is the hardest aspect of online forex trading to develop. For beginner traders, the main problems can be narrowed into four psychological challenges that need to be overcome.
One of the main misconceptions about trading is that it is a fast track to wealth. Although many are enticed to trade by the promise of profits, it can be a slow and difficult path before one achieves consistent returns.
A trader that aspires for quick riches on the get go might get easily discouraged, especially when losses or losing streaks occur. Dealing with a negative account balance can be very challenging for a beginner trader, as he or she feels increased pressure to perform better and make up for the damage.
If losses compound, a trader might suffer a breakdown if he or she simply focuses on the money aspect instead of the correct process. One might result to overtrading in order to hopefully recover right away but this can lead to haphazard decision-making.
Online Forex Trading Psychology Tips
As mentioned earlier, losing is part and parcel of forex trading. There isn’t a single expert trader that hasn’t experienced a loss at least once in his trading career.
Of course, encountering a loss can be accompanied by negative emotions but one should not dwell on these for too long. Instead, it is more important to be able to review what went wrong, analyze what could’ve been done better, and figure out how to improve later on.
There are some cases in the online forex trading market that your analysis may be spot-on but the price reacts in a way that you didn’t expect. In other words, having the right analysis of the markets doesn’t necessarily guarantee a win for your online forex trading setup.
For one, the market could always have a surprise up its sleeve. There can be sudden events or unforeseen happenings that could completely change the course of price action. Another scenario is that you could predict price behavior correctly but could not structure your trade properly or manage your risk well.
Always remember that analysis is just one part of the trading equation. Proper online forex trading execution, risk management, and discipline are also integral parts in landing with a profitable trade.
In online forex trading, the key to staying positive in the long run is proper risk management. Even if you are always correct in your analysis, if you do not exercise enough discipline to limit your losses or lock in your gains, you might end up losing overall.
Some traders are so motivated by the potential reward that they could end up doubling their risk when they feel extra confident with their setup. For beginner traders, this is a practice that is not encouraged because it turns trading into a form of gambling.
Remind yourself that you should always be prepared to handle the loss in case price action doesn’t turn out the way you expected. Even more importantly, you should be confident enough that you will be able to bounce back from that loss later on.
