There are many elements of psychology that promote a successful trading activity. Psychology in this context refers to the mindset every trader should have while trading. In particular, the traders should focus on these areas:

  • Overcome fear during trading
  • Control the tendency to be greedy
  • Learn discipline while trading.

What motivates traders?

Many traders will confirm that they enjoy their jobs because it is exciting. However, enjoying the excitement and making money can become quite conflicting. For example, the groups of clients at a casino who are excited about the free drinks are the amateurs, while the experienced card counters focus on their game which gives them an advantage regarding card count potentially increasing their earning chances.

One thing is certain, to become a successful trader, you must be disciplined.

Issues encountered during psychology trading

The fear of taking a loss: many traders proceed with their trading activities cautiously and sometimes limiting their abilities because they are afraid of incurring losses.

Quitting too early: some traders quit their positions too early out of anxiety or doubt due to the fact that market is volatile. The repercussion is a feeling of disappointment while attaining the instant gratification.

Experiencing an average down: this is a situation where the trader refuses to acknowledge the impending loss in the hope that the trend will reverse while incurring more losses during the wait.

Refusal to acknowledge the obvious situation: some traders find it difficult to accept the negative trends in the markets they avoid taking responsibility for the trade.

Compulsive trading It is easy to get carried away by the market trends while some traders become addicted to the trading activities hence they lack the ability to control compulsive trading activities.

Feeling over excited after earning: a minor earning can make a trader feel overconfident, which is a ‘recipe’ for making mistakes.

Making small investments: due to psychological issues such as low self-esteem some traders limit their trading activities to small trades and investment thus reducing their capacities to earn more;

Overlooking the tested and trusted trading patterns there are methods that have been tested and trusted, but some traders overlook these methods because they do not trust the system;

Excessive analysis: some traders tend to over analyze their decisions before making trades due to feelings of doubt and the fear of losing their investments. There are inevitable risks during trading which should be accepted; however, some traders cannot accept the fact that there might be losses during trade;

Trading using the wrong position size: this happens when traders fail to acknowledge the importance of money management and risk assessments while avoiding the need to take responsibility for the trade.

The fear of trading: The fear of losing money, feeling the need to avoid ridicule, lack of control, and the fear of risks.

Trading with borrowed funds: Engaging in trading as the last option for success, trading out of desperation, trading without discipline and allowing greed to control trading decisions.

These are some of the common psychological issues traders contend with in the forex market. In general, these issues are experienced due to the poor approach the trader has chosen to make their trading decisions which usually involves their emotions and insufficient knowledge. It is, however, apparent that the role of psychology is vital during trading.

Regarding psychology, every trader should accept the fact that there will be good earnings and some losses, it feels great to win, but a strong emotional resilience should be developed in case of losses.

Accepting losses while trading

Many psychological perspectives attribute losses to prevalent social conditioning which the trader has been subjected to over time. The experience of a loss triggers emotions such as fear, uncertainty, and self-doubt among traders.

To avoid this experience, it is important to accept the fact that losses may happen and it is a part of trading. It is inevitable; some trader will lose money. The extent of losses is what differentiates the good traders from those who fail to use the best methods.

The process of accepting loss begins with redefining the term- loss. If the trader assumes a loss to be an indication of failure, they may soon experience losses which will greatly affect them, but if losses are accepted as a new opportunity to perform better, there will be a better experience in future.

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Locked Patterns
There also exist some innate human patterns that can constitute some challenges traders encounter.

An example is when a trader has a locked-in pattern.

The trader will continually make the same mistakes while trading. Traders who experience this issue are fully aware of how they make the mistakes, but they are unable to make the necessary changes to avoid the mistakes because it has become a patter. In this case, the trader keeps losing huge funds. Some of these instances include:

  • Making long trades even when the market suddenly goes down.
  • Making short trading actions while the market goes up.
  • Experiencing acute anxiety and shortness of breath.
  • Feeling the urge to destroy your computer while entertaining suicidal thoughts.
  • Feeling anxiety when the market has only been opened for a few minutes.
  • Lack of comprehension of the current events.
  • Experiencing a psychological trading spiral.

How to break negative patterns

Being proactive about changing the old mindset is a good way to break the pattern. The following suggestions should be helpful.

  • Take a break, go for a walk.
  • Ensure that you adhered to your trading format.
  • Find areas in your system that need to be improved and make changes.
  • Focus on improving your old system to make it better, learn to accept loses.
  • Reduce your investments until you start making profits again.
  • Negative patterns should be broken and replaced with better methods.
Author's Bio: 

Torsi is a professional blogger.