Psychology is the most important factor for making profit on Forex

When people start trading, the first impulse is to focus on charts. In the end, all price movements are visible on the chart. Here you will find double bottoms, reversals, breakouts, and trends that bring big profits. However, many traders realize that success, at least, lies in the fact that there is more to trading than charts, more than just closing deals. Perhaps you also realized that finding winning deals is not enough. There is something standing in the way of profit, and this is something – psychology. Psychology is the study of the psyche, behavior, and patterns of behavior; what makes us do what we do, how we overcome the obstacles that hold us back. Surprisingly, trading is basically a mind game. This is not a market that you need to win, it is you.

Trading discipline is the foundation of your success

Trading discipline is the foundation of your success, as it provides a set of rules that you must follow to help prevent unnecessary losses. I say unnecessary losses, because you, as a trader, cannot avoid losses, you must be prepared for this, otherwise, it will drive you crazy. The root causes are fear and greed. Fear and greed are two of the strongest emotions that traders experience and which are not easy to overcome.

What does discipline mean? This means coming up with a set of trading rules that you always follow so as not to make decisions based on fear or greed. Rules can be as simple as trading only once a day, they can be as complex as making deals when the price of an asset bounces off support after a bullish breakout and is confirmed by a bullish MACD intersection and an increase in RSI.

The market can make you angry. It will infuriate you if you do not do what you think should be done. Your rules are designed to deter you from making deals based on insanity. Trading in annoyance, revenge trading, trying to return to the market by making wild bets is the real thing.

Here is a sample list of rules for speculative traders. These rules can be used for Forex, CFDs, Options, Commodities or Cryptocurrencies.

  • Each transaction will always be 1% (2% or 3%, 5% becomes risky and 10% is very risky). Using% instead of a fixed amount will increase or decrease the size of the transaction along with the account balance in order to maximize profits and minimize losses.
  • I will always trade with the trend. I will determine the trend by price movement, trend lines, moving averages and MACD. I will only enter on confirmed inputs. My intersection signals in stochastics and MACD, confirmed by the breakthrough of the 30-period moving average.
  • I will not enter if the price action is within 3% of resistance (for bullish deals) or support (for bearish deals).
  • I will use the support and resistance goals as exit targets for my trades. If the price action reaches the goal, I will go out to take profits.
  • Some gains are better than no gains, and infinitely more satisfactory than losses.
  • I will not have more than one open transaction for one asset at a time.
  • I will not open conflicting transactions for the same asset at the same time.
  • I will not have more than five transactions opened simultaneously, that is, 5% of a risky account at a time.
  • I will always follow my rules.

The last rule is the most important of all. It doesn’t make sense to have rules if you don’t use them. Otherwise, the market will infuriate you and force you to do something that will destroy your account and trading capital.

There are millions of factors that can affect your trading psychology. This list contains emotions that can encourage you to make bad deals. The key to understanding your psychology and improving your list of rules is to be aware of what can make decisions and recognize when this happens. Then you can step back from the situation and regroup without losing money.

Fear is one of the evilest emotions a trader can face. Fear can deter you from making a deal, it can also deter you from making a profit. Fear of losing money in your account will force you to make transactions, but you cannot allow this, you must make transactions in order to make a profit. If you save your transactions in small volumes, not a single loss will harm you, and you can still trade again. Fear of losing the profit you can make can deter you from making a profit that you already have. If you do not take profits in favor of expecting more, most often your profits will evaporate.

Greed is the second most important emotion a trader may encounter. Greed is another face of fear. Greed is a fear of losing profits that you don’t have, or a desire to make huge deals and make huge profits. What surprises traders are that greed raises its head when you are doing well. A series of victories can increase your confidence, which can lead to aggressive transactions and large losses.

Leave a Reply

Your email address will not be published. Required fields are marked *

Solve : *
30 ⁄ 15 =