Trade Forex Trading

Psychology of Currency Market

The reason/explanation why 90% of traders lose can be summed up with 2 words:

Forex Psychology

Many people fail on the currency psychology front & only a few take the time to transform their mindset. The reason why most people make losses is not that they can not beat the market, but because they don't have the right mindset. Forex psychology is all about transforming your mindset.

Success in Forex depends on mastering your trading method and dedicating significant time to understanding market dynamics.

The currency market's pretty complicated. Tons of different things push prices up and down every day. If you want to trade seriously, you have to dig into how the online currency market moves, learn the patterns, and really understand what makes those price swings happen.

Psychology and Emotions

In the market, winning depends on how you think. Studying the psychology of the market means looking at what affects other people, including how people generally act when they trade currencies every day. Anything that involves winning or losing large sums of money becomes very emotional. To win, you need to know your own mind and how people's feelings affect currency prices.

In most cases when traders invest in a currency, they invest more than just money - they make an emotional investment. This is where most go wrong: being right becomes more important than making money. When the transaction goes wrong since they have already made an emotional investment they let their decisions to be ruled by their emotions & they hold on to their losing trade positions in the hope that it will bounce back. Unfortunately their losses become greater & they find it even more difficult & hard to close-out their orders.

Even when traders make money and let their emotions get in the way, they either become greedy or overtrade.

Forex psychology builds a solid base for profits. It teaches you to ignore emotions in trades. Do not let feelings guide your currency choices. Trader habits stay the same over time. People repeat errors again and again.

You're able to discover how to handle the three3 most harmful feelings, which tend to affect your judgment and make you lose money. These 3 feelings are:

  • Greed

  • Fear

  • Hope

6 Tips for Transforming Your Mindset

1. Define your goal.

Before engaging in the foreign exchange arena, several crucial questions pertinent to Forex trading must be addressed. Establishing and clearly defining a concrete goal will provide the necessary starting point for achieving success.

2. Keep it simple.

Rather than overcrowding charts with multiple indicators, traders should remember that excessive tools can hinder accuracy rather than enhance performance.

The 3 most powerful tools to use are:

  1. Candles (buyer and sellers behavior),
  2. Price action (such as support & resistances), and
  3. Trend line (up, sideways or down).


3. Do-not get emotional.

If you're attaching emotions to your forex trades because there is real cash involved you need to change your mindset and start following your trading plan. If you're a novice trader with no previous experience always start with training & learn until you start making profits on you practice account before investing your capital.

4. Nothing wrong with break even.

Not every trade will win. Breaking even beats losing money. If a trade goes against you, don't hope for a reversal. Cut the loss and look for the next opportunity. The market offers plenty of chances to profit.

5. Speculation is your worst enemy.

Avoid guessing a currency pair's path. Check your charts and plan first. Study the trend before trading. Follow the trend - it's your guide.

6. Do not allow your winning orders and positions to turn against you.

If you, as the trader, have an open profitable position, do not permit it to turn negative. It is superior to set a stop loss just 5 pips above your initial entry point, ensuring either a break-even outcome or a small gain, rather than allowing it to result in a loss.

To learn how to apply these tips, refer to the FX plan guide: the relevant section is provided below.

Forex Psychology Section on Plan - Transforming Your Forex Psychology and Mindset When Trading

Psychology Section on Forex Plan

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