Welcome back to another blog by AspireFX. Today we’re going to be discussing the importance of having sound psychology especially during these turbulent times. If you are unable to manage yourself and your emotions, you’ll struggle to manage your trades as well. You need to ensure your mind is in gear with the markets otherwise you stand no chance of making consistent profits.
The forex market offers enormous earning potential and appeals extremely well to our innate desire of earning uncapped amounts of money. However, don’t be fooled into thinking trading is easy and that you can millions in minutes right from the beginning. The earning potential of trading forex is something unmatched when compared to other industries but what comes hand in hand with that is the enormous risk you open yourself up to when you let your emotions get the better of you. Being overemotional when trading can lead to clouded judgement which in turn will lead to you creating the incorrect mindset towards the market. Instead of seeing the market for what it truly is, a huge mass of people buying and selling at certain prices which moves up and down like waves in the ocean, you develop certain fantasies about the market based off of the amount of money you want to make or where you are looking for price to go. This is an example of greed, an emotion that all of us have experienced in our lifetime before.
Beginner traders struggle with greed the most. There are multiple errors that you can make which could be detrimental to your trading account. Holding trades for too long because you are waiting for more profits and then watching price reverse and hit stop loss is a mistake amateur traders make often. The market can bounce around from price to price with absolutely no regard for where you are wanting the price to go or how much profit you want to close on. Risking too much capital by entering over leveraged positions will lead to you blowing accounts unnecessarily. Entering multiple trades on multiple pairs is an example of greed as well and we call that over trading. Do not confuse yourself by entering too many setups leaving you with no time to manage your trades effectively.
It’s important to understand that as humans we tend to act out our emotions in the market and if you are not in the correct mindset, it would be beneficial to your trading account to rather stay out of the market and practice patience. Always be aware of what emotions you are feeling when trading, if emotions like greed, fear, gamblers high or overconfidence ever creep in, rather close your trades because even the best trading setups can go against you with a weak psychology. Keep in mind that as traders we are competing against some of the sharpest minds in the world, that’s why it’s essential to keep risk management in mind at all times. As always trade safe and subscribe to receive our blog posts instantly.