FOREX TRADING PSYCHOLOGY
Why is it Important?
One of the most important things to do before undertaking any endeavor, of course, is to prepare. Why are you continually failing? Because you don’t prepare or you don’t prepare correctly. You need a reality check buddy and this is it. This article will help you become the trader you know you can be. We’re not in Kansas anymore Toto…
Preparation with Forex Trading Psychology
The most prominent CEOs prepare well in advance of work. Do you want to be successful like a top CEO, the 1%ers? Then work on your forex trading psychology. They’re preparing in most cases at least 2 hours before they’ve arrived at work. 2 hrs of preparation in advance of an 8-10 hr workday. Preparation is how the many of the best stand out among their peers. It’s not just how many hours they work, but the preparation in advance for the work they’re about to do that sets them apart.
What Other Experts Do
Top athletes will practice well into the late hours in preparation of short 5-minute event that occurs only once a year. Add to that the regular visualisation exercises that they implement when they’re supposed to be recovering, and you have hours upon hours of preparation for a narrow window of opportunity. Forex trading is similar in that the professionals prepare hours in advance of news releases in anticipation of a tiny opening to push the sell or buy button. They too will use forex trading psychology in the form of visualisation to implement a particular action in response to the market news. Without such preparation of the mind, the forex trader will fall prey to the following repeating cycle of emotions. This cycle is one of many obstacles that prevent you from trading at your best.
So the question is then: how do we prepare? What does implementing forex trading psychology mean? In reality, you should prepare in the mode that is suggested by the medium. In other words in the forex world market price is determined by long term and short term news or anticipation of imminent future news. You will see this mentioned throughout my upcoming course with evidence to back it up. Technical trading may work, but it is not based directly on how the market works. It may have its uses, but if you use it independent of fundamentals, in the long run, you will suffer a substantial drawdown because of its disconnect with reality. Evidence of future large drawdowns is found everywhere in the technical world even in professional hedge funds who refuse to implement anything but the technicals. Again, evidence for this will is later on.
Preparation in Forex
Preparation for determining a shorter or longer term trend should involve hours of evidence building by reading many reliable news articles, listening to feeds and commentaries. Only then will you be prepared with the level of certainty needed to enter a trade and stick with it. If you want to master the art of trading prepare yourself with reality-based arguments that leave you with the confidence to remain with a trade till its completion.
The “Art” of Technical Trading
Basing entries and exits on patterns on a chart is more gambling than trading since it’s been demonstrated that patterns by themselves are random. Viewed within a context these price patterns may prove to be statistically valid but then the question remains, which setting? If you spend your time preparing by observing price pattern only within the context of more extended time frame price patterns or trends, it’s not enough.
The Experience of Certainty and Confidence with the Markets
Focus on understanding the sentiment or longer-term fundamentals behind the move. Then you’ll know whether the sentiment is still active and the trend likely to continue or not. You will also know which trend should be the strongest and offer the best trades best on the fundamentals and sentiment. It’s this experience of certainty that results in conviction and confidence while trading. A sense of certainty is the foundation of your forex trading psychology but it’s not sufficient.
Other Methods of Preparation
There are other methods of preparation to gain the psychological certainty needed. We’ll introduce the concept of deep breathing exercises in the later part of this unit, visualisation of the process, mental contrasting. These should be tended to 5 times a week or as long as the market is open to obtain the edge needed to succeed. A checklist method is another way we can help ourselves carry through with such activities in a consistent manner.
The other psychological method that helps maintain an edge occurs after the trade. It can be done while the trade is still open or shortly after it’s closed. It’s what I do in my blogs at Andiamolireforex.com. I review a recently opened or closed trade to show what I did right and what I could have improved upon before, during and after I completed a trade. I will comment on the fundamental/ sentiment based reasons for why I entered the trade as well as the feelings I experienced that might have tempted me to close a trade prematurely or let it run indefinitely. All these steps are vital in developing a proper forex trading psychology that leads to consistently profitable trading over time.
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