Forex Psychology: How to Improve Trading Psychology Tips for Traders

Never pick market bottoms and market tops

Some Forex traders are always trying to pick top or bottoms when trading the market.

These traders want to sell at the absolute top & buy at the absolute bottom way even before the currency market direction has turned and reversed. Those who try and pick the market reversal turning points are almost never accurate in their call, their trade positions generally moves against them for quite a substantial amount of pips after they open their trade - only for them to get stopped out before the market turns. And that is if the market turns at all - most of the time when a market is trending the price will generally keep moving in a general direction - either upward or downward. It is always better to wait & open a trade position after the market direction has turned and reversed than try & predict the turning point before the market has really turned.

Most of the times, keyword - most of the times it is better to trade with the direction of the market trend. Traders even have a particular popular saying "THE TREND IS YOUR FRIEND". Although there is always a turning point for a trend, there is no one who can predict the exact high or the exact low of a trend - this is determined by market forces. The high & low are formed by the market forces. Therefore, if the market forces haven't determined a market high or a market low then traders should not try to determine these points on behalf of these market forces.

Never Average down

Some traders keep buying when the price is falling and dropping lower so as to neutralize their trading losses of previous trades once the market trend turns and begins heading and moving in the direction of their trade. This almost never works because generally, when price starts/begins to move in a certain particular direction it mostly continues in that specific direction for quite a while - This concept is in trading known as - 'Trend' or 'Market Trend'.

The idea of buying against your first trade position so as to offset its trading loss gets more complicated once the currency market starts moving against your second trade position.

When you need to open several trade transactions/positions just to erase your first initial mistake, you are executing and entering new trades not because of your objective market analysis based on your trading strategy, but you are opening new trades to save your losses which can be easily avoided in the first place using stop loss - and always exiting losing trade positions at a particular specified level, after all some you win, some you lose: is the right psychology and mindset to have as a trader.

Know when to trade and when not to

A good trader understands that there are times when it is just better to be in an all cash position & watching the market from the sidelines doing nothing and waiting for another trade opportunity when the market has more favorable factors - or in trading terms, when the market has a better RISK:RWARD RATIO. Knowing when not to trade is just as important as knowing when to trade - if not more important.

You can trade one day in a week and make profit if the market setup was correct according to your trading strategy or you can trade 5 days a week (and if you aren't following your strategy) and make a loss. It's all about following your Forex trade system/strategy. If there is no signal to trade from your trading system, then simply don't open any trade order on that day, it might mean the difference between keeping your trading capital in your account balance the same or making a trading loss that day. In trading the first priority is always to preserve trading capital - rather than making profits, making profits should always come in second. As a trader always understand that. Your trading capital is your weapon - how will you fight if you lose your weapon? - But as long as you have your weapon you can always fight. That is the trading psychology that you should have as a trader.

Do Not Fall In Love With Your Trades

Are you "Trading the Market?" or "Loving the Market!!!" - Decide: Do You Want To MAKE TRADES - BUY and SELL ORDERS - OPEN A TRADE & CLOSE A TRADE i.e. OPEN and THEN CLOSE TRADES or do you want to FALL IN LOVE WITH YOUR TRADES? - The forex market doesn't care about your emotions or which currency pair you buy or sell, - THE MARKET IS ALWAYS RIGHT. There is a song that says COMPUTER LOVING IS NOT FOR ME - LOV not LOVE, LOV - Here at Trade Forex Trading Website - "TRADE LOVING" is not for We - Neither is it for our Traders. Learn That!

Don't marry your trade positions, (Even for the position trader, "especially for the position trader" - when its time to execute trade close - Execute with the precision of a Soldier.). The reason/explanation why trading with a trading plan is recommended is because most of the objective market analysis is made prior to and before a trade position is opened and executed. Once a trader opens a trade - and is in an open trade position already, they tend to analyze the market price movements much more differently in the hopes that the market and the prices in general will move in a direction that is favorable to their trade instead of objectively looking at and analyzing the factors that might have turned and changed against their initial market analysis. Hard to say but, Those traders with a losing trade position tend to get married their trade position, which then causes them to disregard the fact that all the market signs and market signals point towards continued trading losses. Learn to always close positions - if you make the wrong call CUT YOUR LOSSES EARLY is the mindset and trading psychology that you as a trader should always have. Live to fight/trade another day - Protect your capital - SOLDIER - "THAT'S AN ORDER".

Never over trade

Over trading is quite a common mistake in online trading. Traders open high leveraged trades - by opening large currency trade positions larger than what their account balance can allow - according to Money Management Rules and Guidelines.

Leveraging your account too high by transacting far larger trade positions than before puts you as a trader in a very vulnerable position leading to bad trading decisions. Always limit your used leverage level to less than 10% of your total account balance.

As a trader, Remain emotionally detached from the trading market and the excitement and emotions that its movements creates.

Do not let your emotions become highly charged and start ruling your decisions. Always be impartial with your trade decisions.

Don't constantly check the prices all day long unless you're scalping. If you get caught up in tick watching the market then you are much more likely bound to making the wrong trade decisions based upon your greediness or panic.

The truth is that most traders know it, but in the actual market trading, they actually keep repeating the same mistake/error, they keep opening new trade positions that are against the ruling/current/present/real-time/prevailing/ongoing/existent/in progress/prevalent market trend just so as to lower the average/mean price of their previously opened trades. The result is that the first open trade that is already a few hundreds of pips away from the current and present price keeps heading against them now in addition to the newly opened trade positions. On the New Trading Platform MetaTrader 5, Newer than MT4 - There is a feature called NETTING. Netting is where the trading platform takes the previous opened trade positions of the same currency pair, adds them to the newly opened trade positions and then averages the opening price of all these positions then displays this as one trade. Hence, the trade opening level on the trading chart is shown as one(the average opening price) and thus summing this up as one single trade. Therefore, maybe on the new MT5 platform traders may not get to view the large loss of their first trade but they will view all the trade positions as an average total, as one averaged trade on their trading platform - "Netting".

Currency trading can be unpredictable. Sometimes even the experienced traders fail in Forex Trading. It doesn't happen due to lack of knowledge and experience. Traders who spent several years training and do have knowledge and experience, Sometimes they fail due to and because of Greed and DISRESPECT To FX Market Psychology. Greed = DISRESPECT To Forex Psychology - Avoid Greed in Trading - Avoid Emotions In Trading.

This science of Forex psychology is very important both for beginners as well as seasoned experienced traders. Psychology teaches and trains you as a trader how to master your emotions when trading the online markets. When you're angry you as a trader forgets about everything which you learned here at Trade Forex Trading Website. You forget about technical indicators. You forget about economic indicators/fundamental data reports. You forget about the market forces and other factors that influence the market price movements. All it is that you can remember is that you as a trader you need to earn money. And not only that, but you want to make and earn that money quickly. But you totally forget about technical analysis and the trading rules of your forex trading system (Do you even have a forex trading system? - How Do I Create and Write a FX System?) - Back to our topic, you forget about your trading system and your trading plan. On the other extreme side, When you get too excited you can't make justifiable and reasonable trade decisions. Thus, because you are over-excited you open positions and trades not because your currency trading strategy suggests so, but you open many trades because you want (Or is it need? - You Choose) to become a Forex millionaire. Some traders even go to the extent of picturing in their minds flashy cars and big houses, like the ones they saw in the latest music videos featuring that mega pop star including even that particular big car the mega super star was driving, that they'll buy after making large wins - that mostly never happens.

What traders need instead is trading psychology/market psychology. Traders need to focus on their trading plan. Traders need to write and specify their trading psychology on their trading plan - market psychology section. The Psychology of Trading is a subject that isn't often discussed and dealt with by many - maybe for whatever unknown reason(s). Traders generally keep themselves busy in finding a trading system or trading strategy that works for them. Finding the right trading system is indeed crucial, however, also understanding the psychological aspects of forex trading and other barriers of forex trading that may have an impact on your trading, whether a positive impact or a negative impact, shouldn't be neglected.

Stick to a trade strategy when trading the market so as to block out the market noise that is caused by short term factors and short-term aspects which can affect the long-term profitability of your trading strategy. Observe what the market is telling you - Don't ignore what the market is telling you. Look at what the trading charts are telling and showing you - follow that all the time, THE MARKET IS ALWAYS RIGHT, Remember What They Say - "THE CUSTOMER IS ALWAYS RIGHT" for us traders - "THE MARKET IS ALWAYS RIGHT" - Never forget, whether you are trading Forex, Stocks, Stock Indices, Metals(Silver and Gold) or CFDs - Whichever Market You Are Trading - "THE MARKET IS ALWAYS RIGHT" - Never Forget.

Almost Similar - "THE TREND IS YOUR FRIEND" - Never ignore what the trading charts are telling and showing you.

Finally back test and refine your trading analysis of the trading charts so as to improve your trade strategy.

The Psychology of Forex Trading is very useful concept in controlling trading emotions. Emotions are very powerful forces in any investment or trading market. Any decision involving money - tends to become highly charged emotionally. This is why all traders and investors of this and other markets should have a good trade strategy.

Having a good trade system will consistently produce reasonable trading profits over the long-term if properly implemented and followed by a trader, so be sure to control your emotions, do your market homework, use the proper and appropriate market psychology principles and stick to/with your trading plan & the pieces will fall in to place over the long run.

Forex Psychology Section - How to Improve Forex Trading Psychology with These Trading Psychology Guidelines

Forex Trading Plan - Forex Psychology Section Learn Market Psychology

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