Trade Forex Trading

Forex Psychology Principles

Trade with the Forex trend only

Stay focused on the large market trends & do not try to react to every price action move. "The trend is your best friend!" follow it. Investors need to adhere to the trend when transacting currencies online. One of the principle of market psychology is to always trade with the trend.

Most beginners will jump into the market when the price chart shows a big movement. These traders don't even bother to understand what's causing the movement, so they make the mistake of being too eager to get into the market. They want to hurry and be the first to get into the market after news comes out, not caring about the direction of the market price, only to realize it was just a fake move when they're already losing money. In this case, most seem brave, not afraid of losing money, only worried that others are making money while they aren't. In Trading Psychology, this is the opposite of what traders should do. In your plan, you should write clear rules on how to avoid this mistake.

In forex trading, exercise patience before entering the market. Avoid rushing due to fear of missing out on profits. Always analyze economic data thoroughly and assess its potential impact on the market.

Breaking news might not always match market predictions. Check its real impact on currency values carefully. Often, such data creates misleading trade signals.

Control your urge to jump into trades first with forex psychology. Take time to study breaking news. Analyze its effects before acting.

While it may take more time, following market trends ensures your trades are aligned with the overall direction, increasing their accuracy.

Trade with a disciplined Forex plan

Traders should avoid basing their transactional decisions solely on intuition. Positions must only be entered pursuant to a thoroughly mapped-out strategy. This plan must explicitly define the criteria for both entering and exiting trades. Utilize the psychology guidelines to frame your mental state when opening foreign exchange transactions.

People who invest should think about everything carefully before starting, and they shouldn't let worry, strong desire, or what others say make them start or stop before their Forex system shows them what to do. Don't let short-term situations change your mind: be disciplined and stick to your trading strategy.

Using a consistent and disciplined plan eliminates the need to make rush decisions depending on short-term price action moves.

Cut your losses and let your profits run continuously for quite some length/duration of time

Some traders tend to hold on to unprofitable positions for extended periods, hoping they will eventually turn favorable. Unfortunately, this often does not occur, as the market continues to move against these positions, leading to even greater losses.

Another mistake investors make is failing to secure profits when they should, and all investors should aim to get the most profit from each trade, but they must also know when the trend shifts and then close their positions instead of waiting while their market positions are still open. Positions should only be held as long as the market trend continues, and they should be closed when the market trend shows signs of slowing down.

Losing Forex investors see loss as failure. Winning traders see loss as a learning experience, this is one principle of market psychology which helps them improve their trading profits.

For winning traders, losses are not failures but opportunities to learn more about the currency market. Successful traders maintain the broader perspective and adhere to their well-structured Forex plans.

Most traders who are losing money on a trade wait for the best time to stop the loss. But, the best time to stop never comes, and the trade keeps losing money. The best time to stop the trade is when the loss is small - less than 30 pips, not when the loss is hundreds of pips. Your account could be emptied while you're still waiting for the market to move in your favor.

A losing position from the start is likely to stay like that - Popular Saying by Investors.

Employ sound trading psychology: cultivate the discipline to realize losses quickly and resist the urge to maintain positions that are losing money in the hope that market conditions will reverse. New trading chances will consistently emerge, provided your available margin capital is not immobilized in an unfavorable trading position.

An investor should get released from a negative psychology and apply the money to do another currency trade. A trader should cut the losses quickly & move to profit making positions. Some investors will end up sitting on a losing position: they generally allow the price to move against their position by a lot of pips while hoping that the trend direction turns and moving back in their favor.

You only make money when you close trades, not when you open them, so be ready to close your open trades as often as you can.

It is a wrong belief that each transaction will gain profits. A trader can still earn money even if only half of his trade transactions are profitable. Question is how a trader can earn profit with only half of his trade positions winning, the answer is that one should keep the losses at a minimum and open other profitable trade transactions. This way the greater number of profit trade transactions offset the losses.

To learn more about psychology and how to transform your mindset using a trade plan go the tutorial FX Plan.

Forex Psychology Section on Forex Trading Plan - Trading Forex Psychology Principles

Currency Plan - Psychology Section

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