Trader mentality – Forex
It is not enough just to have a good strategy to make money in Forex. When two investors use the same method of operation, they usually have opposite or similar results. The difference lies in investor psychology, which determines actions according to their personality and past experiences.
Successful investors have realistic goals regarding possible earnings relative to its capital exchange and available budget. They do not have the ambition of becoming rich overnight. This way of thinking is good for success and allows for the trader to not make mistakes related to emotions and unnecessary risks. Instead, an unsuccessful investor will have the ambition to win large sums of money in a short period of time, regardless of the funds he or she has available. It is not uncommon for novice investors playing the market with single hundred dollar bills, to believe that easily they can multiply their capital tenfold in just a couple of months. This way of thinking only contributes to a higher level of risk and further financial losses.
If the trader’s not afraid of losing money on an exchange, it is a good sign that the mentality to invest is correct. When suffering losses, it is possible to distance yourself of emotions so you buy a specific currency pair. Many start investing with strict money management rules (which is recommended) but eventually they abandon their practice after suffering significant losses or gains. Professional investors maintain a constant level of risk control without thinking about the global profit or loss amount; they know that at any moment the Forex market can change, and anything can happen; every moment is unique in its class. We must always be aware of the dangers and standard errors caused by the perception of “lack” of success.
Those who often fail, do not manage risks properly. Successful traders usually spend large periods of time following the positions of each currency pair. The excitement of the gain improves the traders confidence to take advantage of an exchange, so it is normal for the next investment to be allowed a larger amount of more risk. When they do not perform a successful trade, it also increases the tendency to seek to recover the amount of money lost. Unsuccessful investors do not control their emotions when implementing their investment plans and risk control measures.
It is important to understand that risk management is the key to success; earnings come naturally if a rigorous risk management is applied, since it will yield good when safely applied. The only effective way to avoid mistakes in relation to emotions is to set the values of input and output before investing. It is important not change your mind once the trade has taken place, since the attachment to the original investment plan remains important. Unsuccessful investors take small profits relative to the risk taken because they pose a precise and effective strategy before taking action. Most of the time they close the position prematurely because they believe that the level of risk did not make them feel completely in control.