Every forex trader should be aware of the psychological weaknesses accompanied with forex trading. Understanding of these weaknesses and good care of one’s psychological health are important parts of being successful. There are all kind of different human weaknesses, however do all psychological weaknesses cause traders to lose? Or are there some specific weaknesses that affect forex trading in particular?
What Forex Traders Suffer From the Most?
Humans have plenty of psychological weaknesses, however not all of them are lethal when it comes to forex trading. The basic trading weaknesses are:
We all have probably heard a saying “Greed is the root of a thousand sicknesses”. The desire for more money is a weak spot of every forex trading. Even after making a profit, the idea of doubling or tripling the amount flames inside like unwanted heartburn. It is important to understand this weakness, acknowledge when it strikes, and learn to control it. Without the ability to control the greed, forex trading will never be a satisfying experience. To make things worse, greed usually leads to losing all the money.
Being impatient is a big flaw in forex trading. Impatient trader usually exits and enters trades at the wrong time, doesn’t follow the trading plan and looses mind when things go bad. My advice is to keep a journal of your trades and write down your emotions and reactions to certain situations during trading. This way you can pin down the exact situations which lead you feeling most impatient. Once you acknowledge the feeling, you will be able to control it, especially when a similar situation is arising. It is quite amazing how easy you can recognize and manage the impatience attacks once you accept the fact that you are impatient.
It is ok to lose a trade. You have to figure out the way to deal with the loss in forex trading. There is no professional trader that doesn’t lose trades. The most important factor of success is your profits in the long run – not each trade. It is unnatural to think that you know-it-all, faultless, immortal and the best trader in the whole world! It is wrong to think that you have no more to learn – forex trading requires life-long process.Don’t forget that excellent self-esteem is only a mask which hides the real you with the low self-esteem.
Come to think of it, fear actually has positive impact on our lives. It helps us all recognize and respond cautiously to dangerous situations and threats. Fear makes a trader more patient and causes extra precaution during decision making. However, sometimes fear in forex trading turns unhealthy – it freezes trader and overpower the ability of reasoning that make you see forex price movements in clearer light. In most cases forex trader is able to control fear via proven strategy and many months of practice. Once the confidence is build up and trader believes in him/herself, fear seems to shrink down.
It is important to have realistic expectations from forex trading career. Whenever the expectations are beyond the reality, forex trader is likely to be disappointed when the results are not reached. Forex trading depends on a lot of factors and not just the desire to make tones of cash. Once the expectations are reasonable and met, they bring happiness, relaxation, devotion and eagerness to learn more about forex trading.
Do all traders suffer from the same weaknesses? What are specific weaknesses faced in forex trading? Last month ForexExplore has conducted a survey “ What is your biggest forex trading weakness?” Below are the results:
24.2% - I do not review and stick to my trading rules and not always apply my trading plan
12.1% - I lose control over trades.
12.1% - I struggle with emotions over losses and lost "potential profits".
12.1% - I still haven't reviewed and defined a good money management system
9.1% - I still misinterpret news from time to time.
6.1% - Indecision is my greatest weakness. I hesitate too much.
6.1% - I am not focused as much as I should be!
3% - I believe that I have magical powers and can predict the future.
15.2% - All of the above!!!!!