Trading psychology is the perception change that you go through once you are actively in the markets trading your own money. When trading on a demo account, it seems like it would be easy to make money and there seems to be no reason why you wouldn’t be able to start making money with a live account. Then you make that first live trade and you start to feel indecisive about when to take profit, or cut your losses.
Based upon how well you know yourself and are able to profit from your strong points, as well as control you weak ones, has a lot to do with how successful of a trader you will be. When you truly know yourself, then you are aware of how you are going to react under certain circumstances and you can protect yourself from self-damaging actions or decisions when it comes to managing a trade.
The first thing you must do in order to conquer the psychological aspects of trading is to know what makes you tick and what your trading personality is. What is your tolerance to risk and what do you need to do to ensure you make the correct trading decisions. In the same way it is always possible to improve your mindset, so think about keeping a diary or trading journal detailing your trade rationale and your emotions at the time of each trade.
The best way to combat trouble with trading psychology is by making a trading plan and sticking to it. Use well thought out risk management and don’t get in over your head. Remember that mastering your emotions will allow you to seize the real profit from the markets while emotions are high for others. If you can master your emotions and follow good risk management practices, you can be a successful forex trader.
When it comes to trading the forex market as well as other markets, only 5% of traders achieve the ultimate goal: to be consistent in profits. What is interesting though is that there is just a tiny difference between this 5% of traders and the rest of them. The top 5% grow from mistakes; mistakes are a learning experience, they learn an invaluable lesson on every single mistake made.
