Our psychology could be an ally or a difficult obstacle depending on which one we’ve trained it to be overtime, and some of us do not even try to understand how the little things we do affect our mind and how that in turn affects the decisions we make as traders, you know… it’s like a double-edged sword, it can help you in attacking but if you don’t pay attention to it… it might come back to hurt you, I’m sure no one wants that so I’ll be sharing some tips that should help you cultivate a healthy psychology as forex traders, let’s go.
I’ll be focusing on areas where we tend to rely on our psychology a lot.
BEFORE THE ENTRY
You see, it’s very easy for our reasoning to be influenced by our current emotion, take a heart-broken guy for example… he just went through a break-up and he’s feeling sad… the logical thing to do is engage in activities that’ll neutralize that feeling so he can start thinking straight again… but an average guy would rather listen to sad songs and other things that’s likely to worsen his state, or a drunk guy who clearly realizes he’s drunk but for some reason he’s still consuming more alcohol… the list goes on, it’s almost as if we are attracted to things that are likely to give us more of the same emotion as we’re currently experiencing, and this could be very bad if we’re making important decisions.
So we should be aware of this and try to neutralize our emotions simply by thinking about our state of mind and analyzing what we feel from the last trade we just took, chances are that if you’re coming from a losing trade you’d be looking to get some profits even if it means breaking some of your rules, we become more desperate in situations like this.
Where as if it is a winning trade you’re coming from and you’re looking for positions immediately after… you could very easily feel over confident as you’re most likely expecting a bunch of wins to continue the streak… this could tamper with your judgement and you’ll come out of trades wondering how and why you took it in the first place.
Taking a deep breath for a few seconds to calm your nerves before placing trades can go a long way in clearing all the anxiety and excitements from previous trades… give it a try.
SECURING THE CAPITAL CAN GO WRONG SOMETIMES
It’s common knowledge that securing the Capital is the first objective of a trader, let’s break this down a bit and see just how good of an ideology it is.
So what do we mean by securing the Capital? taking necessary actions to ascertain that whatever happens your capital remains as it is, while this is good it could also come back to bite you.
Here’s a scenario, you got in a position and price starts making a rejection off of your entry point and you then move your stoploss to the entry point with the hopes that price will continue moving into profits but then price retraces back and hit the level taking you out but still continues into profit, sometimes it may not even hit your entry but the spreads take you out either ways, this might not be the case every time, I mean its forex right, but personally I have experienced this a lot, trying to secure the Capital by setting stops to Break-even might not be the best choice unless you’re trading at a time you shouldn’t be trading at or you’re just skeptical of the setup, then that’s fine, but there’s an alternative.
You could easily close a percentage of the open Positions to cover for the part of your Capital at Risk this way you can leave your stops where they should be until price moves to a reasonable distance. Then again you can wait for the previous highs/lows to be broken before setting your stops to break-even either ways don’t be pressured to secure the capital just as you get in on the trade.
Don’t sacrifice what could be for what is, do the necessary calculations and know what is at risk, and be fine with letting it go, if you can’t bear losing it don’t risk it.
And lastly …
This is a great way to test a new trading/psychological strategy.
Creating new accounts is a good way to ease the mind of major emotions when making trading decisions, I recommend doing this when trying out something new or different from what you’ve been doing.
I hope this was helpful in some way, to get more valuable contents as they drop follow my Instagram @seda_capital