Forex trading psychology: Trading psychology

experience and risk
losing trades

Revenge – Traders experience a feeling of wanting “revenge” on the market when they suffer a losing trade that they were “sure” would work out. The key thing here is that there is no “sure” thing in trading…never. New traders often look for opportunities whenever they might appear, so they get lured into trading on various markets. However, they don’t understand or care about the differences within them. You will get inconsistent results without a well-drawn-up strategy that focuses on a few markets.

As the trading psychology definition goes, when traders stay reasonably cool-headed and rational, they tend to have better chances of generating larger payouts. Besides, they can even minimize the amount of loss they take. If there is something that is the “glue” that holds all of the points I’ve discussed in this part together, it is being an organized trader. By organized, I mean having a trading plan and a trading journal and actually using both of them consistently.

It addresses forex trading psychology, the impact of emotions, and how to manage each while growing your trading account in the process. Mastering trading psychology all comes down to experience and knowledge. The best way you can ensure your strategy is uninfluenced by emotions and biases is to build a plan and stick to it. It’s important to avoid making any decision about a trade based on an emotional response or bias.

Moreover, influences and biases can be the source of explanation of all types of market anomalies, specifically those in the stock market like severe rises or falls in stock price. One of the biggest misconceptions in trading is this idea that people can instantly get rich just by starting trading in Forex, stocks, or any other market. They believe that with a single position, they will get a huge payout. It is possible to make a lot of money using a single trade.


A greed-inspired trade may involve buying stocks of untested companies because they are on the rise or buying shares of a company without understanding the underlying investment. Greed can be thought of as an excessive desire for wealth, so excessive that it clouds rationality and judgment at times. Thus, this characterization of the greed-inspired investor or irrational trading assumes that the greed emotion can lead traders towards a variety of suboptimal behaviors. Finally, traders should periodically assess their own performances. This periodic assessment can help a trader correct mistakes, change bad habits, and enhance overall returns.

Therefore, being adaptive and exploring new strategies will help you during such drastic changes. Another tip that can possibly improve the psychological response to various market development is to have a certain plan. In fact, a trading plan is important even if you’re not concerned about your mental condition – that is, you tend to remain cool-headed and rational. It allows you to dedicate a certain amount of time, funds, and resources to the trading and have a strategy to follow. This ultimately helps your mind be less stressed over not knowing what to do next. Forex trading psychology is one of the most important aspects of trading that can have a massive impact on how people conduct their trading positions.


As psychologists and behavioral scientists suggest, our actions are based on our emotions quite substantially, therefore, we’re bound to make mistakes when we are in an unhealthy mental state. And all this can manifest itself in a poor Forex psychology. As for greed, yet another critical factor in the psychology of trading, it also is innate to our character.

trading account

It is common during bear markets, and it is characterized by significant selloffs from panic-selling. Traders with keen attention to comprehensive security price influences, discipline, and confidence show a balanced trading psychology that typically contributes to success. Trading psychology is often important for technical analysts relying on charting techniques to drive their trade decisions. Security charting can provide a broad array of insights on a security’s movement. Conversely, fear causes traders to close out positions prematurely or to refrain from taking on risk because of concern about large losses. Fear is palpable during bear markets, and it is a potent emotion that can cause traders and investors to act irrationally in their haste to exit the market.

Fear and anger

However, taking them into account can still have a significant effect on how they react to the payouts or losses and how they make trading decisions. Market conditions might change but Forex market psychology remains the same. You have probably heard that most people who attempt Forex trading end up losing money. There’s a good reason for this, and the reason is primarily that most people think about trading in the wrong light. These unrealistic expectations work to foster an account-destroying trading mindset in most traders because they feel too much pressure or “need” to make money in the markets. When you begin trading with this “need” or pressure to make money, you enviably end up trading emotionally, which is the fastest way to lose your money.

No matter if you’re trading stocks, currencies, or commodities, it’s imperative that anger is kept in check at all times. Two good ways to manage anger are to take a break from the markets or reduce applied leverage. So many different factors can impact a currency pair – from macroeconomics to local news – which is why most FX traders choose a more technical approach. Using technical analysis gives a more quantitative base for decisions, rather than emotions and personal opinions. The different elements of a trader’s personality can have a significant impact on their trading outcomes. A lot of the ‘ultimate’ traits you’ll see listed for traders are discipline, patience, confidence and decisiveness.

Trading Psychology in Forex

Fear – Traders become fearful of entering the market usually when they are new to trading and have not yet mastered an effective trading strategy like price action trading . Fear can also arise in a trader after they hit a series of losing trades or after suffering a loss larger than what they are emotionally capable of absorbing. To conquer fear of the market, you primarily have to make sure you are never risking more money than you are totally OK with losing on a trade. If you are totally OK with losing the amount of money you have at risk, there is nothing to fear.

Although it’s useful to get ideas and inspiration from professionals and other traders, it’s important to keep your strategy and plan in mind. Each trader will have different risk tolerances – so, what’s considered risky for one might be a safe bet for another. It doesn’t necessarily matter which of the personality traits you have, because they can all be managed. One of the best ways to weed out the dangerous traits from the beneficial ones is to practice trading first in a risk-free demo account. This enables you to build up your confidence, discipline and patience without putting your capital at risk.

Ways You Can Trade Like a Hunter

You need to know what your trading strategy is and you need to master it. We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools. We’re also a community of traders that support each other on our daily trading journey. Like any necessary activities in forex trading, testing your strategies can provide you with the tools you need to get that extra edge over the markets. Some traders take losses personally and end up reacting adversely by taking revenge trades.

What is forex trading psychology?

The fear of missing out is the most treacherous emotion in the financial market. Significant rises entice the traders to buy though the move peaked, which leads to considerable stress and feelings when the market then reverses its direction. Negativity bias makes a trader more inclined to the negative side of a trade instead of considering both the positive and negative sides of a trade. Behavioral finance has documented several psychological biases and errors involved when making trading or investment decisions. Now, let’s say that you lost a trade even though you followed your strategy and all your rules.

Once you start trading just because you “feel like it” or because you “sort of” see your trading edge…you kick off a roller coaster of emotional trading that can be very hard to stop. Don’t start over trading and you will likely not become an emotional Forex trader. You’re bound to face uncertain times on the Forex market, but that doesn’t mean you can’t succeed. Simply detach yourself from that situation, understand the negative thoughts in your mind, and focus more on positivity. Stick to the plan you’ve developed for yourself, follow the tips included here, and see things improve with time. Avoiding Trading Mistakes — Every trader makes mistakes at times, even if they’re experienced.

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