Successful traders know how to control their emotions when it comes to forex trading. This is achieved by overcoming greed, employing the right trading plan, and following a proper risk management strategy.
Letting your emotions influence your trading decisions is the worst thing to do in forex trading. Detaching yourself from emotional trading and maintaining a strategic mindset is not easy. But that is exactly what trading demands.
Before stepping into the forex world, you should learn the times the markets open and close. Meanwhile, read this post to understand forex trading psychology.
What is forex trading psychology?
Trade psychology is an umbrella term that encompasses the behaviors, feelings, and emotions of traders. Mastering trade psychology means keeping excitement, fear, greed, and impatience out of trade’s way.
Trade psychology is crucial because it’s your mind that decides how you will react to an outcome. Many forex traders experience negative psychological effects after facing losses. Similarly, they also experience positive psychological effects when they make a huge profit.
Fear and greed are two of the worst enemies of traders. Being able to control these emotions is a sign of being a successful trader. You need to understand that the forex market doesn’t care about your emotions. This is why you should teach yourself to manage both the negative and positive aspects of trade psychology.
How to control greed?
We are not trying to exaggerate anything but too much greed can put an end to a trader’s career. It is considered the root cause of all their problems.
Greed is born out of the strong desire to earn more money. It can cloud a trader’s mind and force them to make wrong decisions. In their mind, they think that earning maximum wealth will lead to happiness. But in reality, it puts them in a dangerous situation.
Greed is the single most dangerous emotion that can remove a trader away from their future goals. Here are some examples of trading decisions that are driven by a greedy mindset:
- Investing more money to gain trade positions.
- Using too much leverage to increase gains.
- Doubling down on losing trades
However, greed can be overcome by following the right steps. You need to identify the times when you are thinking greedily and readjusting your mind to make a better choice. Gaining control over your mind is not something that will happen overnight. It will take time and effort to achieve that level of mind control.
Remember that traders who are consistent and disciplined in their trading approach are less likely to fall victim to greed. They are well-prepared for the trading market and won’t let greed come their way.
As a trader, you should make it a habit to follow accurate trading plans. This is the best way to control your emotions at the time of trading. Make sure that all your trading plans include stop losses and risk management solutions.
You can also maintain a trade journal where you can share your trading performance and emotional state. This will help you to understand emotional trading patterns and stay away from them.
Avoid FOMO
FOMO means Fear Of Missing Out. This is another issue that traders have to deal with. It refers to an emotional state that most people go through in their lives.
FOMO results from feelings of impatience, envy, and jealousy. These emotions are further intensified by the fast-changing environment of the forex market.
Here are some tips that can help you to overcome FOMO:
- Follow a routine
To avoid the FOMO mindset, you need to first get rid of the distractions and focus on the forex market. Try to identify important trade opportunities and key market spots to remove external chatter. By avoiding social media outlets you can make the process easier.
- Shape your mind
Human beings tend to focus on negative things and stay stuck in the past. Losing a trade doesn’t mean the end of the world. You will get more new opportunities ahead. This is why you should stay present-minded and focus on your future trading goals.
- Follow a trading plan
Following a well-developed trading plan can bring you plenty of benefits. It will help you to invest with more consistency and lower risks. As a result, you will get better returns.
Final Words
For the best outcomes, you should trade with joy and a clear mindset. Don’t let your emotions cloud your mind. If you think you are too stressed, take a break and readjust your mind before going back. Trade should be treated as a business. FOMO originates from envy, insecurity, greed, and jealousy. Once you learn how to control these emotions you will see positive results. It will help you make correct trading decisions and gain more profits. Therefore, you should put all your effort to train your mind.