When trading on the Forex market, success is not mind over matter, it is the mind that matters. Experienced traders know that psychology drives both your performance on the trading floor, but the market itself as well. Playing to win depends on knowing not only your own mind, but understanding the psychology behind the movement of the market.
Evaluating market psychology is not a new study. Even the novice trader can grasp that market fluctuations depend heavily on the psyche of the major decision makers. Experienced traders, however, are aware of the myriad nuances that motivate the market, based on the mind games of key players. Keeping this in mind, along with the psychology of the broad market and being fully aware of your own motivations will keep you, the trader, on top of your game.
Top Forex coaches will confirm that to become a successful trader you must be fully cognizant of what influences you, and stimulates your actions. This self-knowledge will help you to overcome negative triggers and utilize positive ones. confused?- No worries, you can soon grasp how the games we play within ourselves influences the trading decisions we make. Let’s break it down. Winning and losing, particularly large amounts of money, is a highly emotional situation. I’m sure you’ve heard that the market is merely a mathematical game – make the right computations and you come out ahead. If this is the case, why are so many traders, well… losers? Everyone has the same numbers, same data and if this is simply an equation, there’s just one answer, correct? Well,numbers may not lie, but your brain is highly subjective. Your own wishes create any number of interpretations, most often the outcome you most wish to see.
When you are trading with large amounts of money at stake, it’s not just money your are investing – you are investing your hopes and fears. If you lose, you are not only losing your money, you are losing self esteem and personal image. This can keep you on a monetary roller coaster, much like a losing player at a craps table desperately hoping to recoup those losses.
The bottom line is – you can’t and shouldn’t shut your emotions and intuitions out of the equation, but you can learn to keep them as the servant, not the master. Most people may feel being right is more important than money – however, it doesn’t pay the bills. So, let’s cut to the chase. The winning stratagem here is to cut your losses and ride with your winners. You have to keep a cool head, know that there WILL be losses and they are NOT tied up with your own self-worth.
This is business, not a definition of who you are – unless you refuse to let go and get on with the next winning trade. Don’t dwell on your losses, move forward! This brings us to a very crucial rule of thumb: Losing traders see loss as failure. Winning traders see it as a lesson learned. Remember – the great Thomas Edison invented at least 100 light bulbs that did NOT work. But he kept on plugging, because he KNEW that his concept was possible. He believed in his research and knew his hard work would get him there. His “failures” were simply eliminating unworkable possibilities. He knew that the more he eliminated them, the closer he was coming to the workable theory A winning trader grasps this completely – they have not failed, they are constantly honing their awareness of how the market works, and how they work within it. Even in a small framework, they are seeing the big picture. If I were to tell you that last year I made 75 losing trades, and 25 winners, you may see me as a pretty poor trader! Wrong 75% of the time??!! However, if I tell you my average loss was $1000, but my average profit on winning trades was $10,000 – well, that means I made $250,000, making an overall profit of $175,000. In this way the mathematics are clear. You’ll hit some losing trades, that goes without saying. Remember though focus on the trade in front of you, be aware of what drives you and where your triggers lie, and keep an eye on the big picture!
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