We are going to talk about feelings today. Don’t worry you are at the right place, we are still talking about forex trading. All this time we have been discussing the factors that affect forex trading. But one aspect that we haven’t touched upon is the psychology of a trader. The mind-set of an investor while trading is just as important as all the external factors we have gone through so far. In some cases, even more.
Your strategies, plans, market research, indicators will all be for nothing if you don’t have the emotional discipline to make the trade. Emotions run high when you have to make a call and real money is on the line. But if you are letting your personal sentiments make the decisions for you, then it’s called emotional trading. And that doesn’t look good for your trading endeavour.
Trading certainly comes with its own set of risks, we don’t need to add our volatile emotions to the mix. Fear and greed don’t exactly inspire rational decisions. But how exactly do you overcome these sentiments? It’s not like there is an emotion switch that you can turn off. So we do the next best thing, limit their influence on our trading as much as possible.
That’s why having a trading plan is so important (We already told you that). So that you have a set of rules in place and don’t end up making rash decisions in a market frenzy. Sounds like, plans are both the symptom and treatment for emotional trading.
Following a trading plan is not as easy as creating one. And it definitely won’t come easy to novice traders. It will take a few trades before you are at ease with your emotions. And when greed and fear are not making the decisions for you. So till you reach that stage, risk only what you are comfortable with and stick to the plan as much you can.
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