{"id":7777,"date":"2010-03-21T05:18:40","date_gmt":"2010-03-21T09:18:40","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=7777"},"modified":"2010-03-21T05:18:40","modified_gmt":"2010-03-21T09:18:40","slug":"what-you-didnt-know-about-the-psychology-of-forex-market-trading-and-how-it-might-bankrupt-you","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/03\/21\/what-you-didnt-know-about-the-psychology-of-forex-market-trading-and-how-it-might-bankrupt-you\/","title":{"rendered":"What You Didn\u2019t Know About The Psychology Of Forex Market Trading \u2013 And How It Might Bankrupt You"},"content":{"rendered":"

By Joseph Plazo<\/strong> – When it comes to trading on the Forex market, winning is a matter of the mind rather than mind over matter. Any trader who\u2019s been in the game for any length of time will tell you that psychology has a lot to do with both your own performance on the trading floor and with the way that the market is moving. Playing a winning hand depends on knowing your own mind \u2013 and understanding the way that psychology moves the market.<\/p>\n

Studying the psychology of the market is nothing new. It doesn\u2019t take a genius to understand that any arena that rides and falls on decisions made by people is going to be heavily influenced by the minds of people. Few people take into account all the various levels of mind games that motivate the market, though. If you keep your eye on the way that psychology influences others \u2013 including the mass psychology of the people that use the currency on a daily basis \u2013 but neglect to know what moves you, you\u2019re going to end up hurting your own position. The best Forex coaches will tell you that before you can really become a successful trader, you have to know yourself and the triggers that influence you. Knowing those will help you overcome them or use them. Are you saying \u2018Huh?\u201d about now? Believe me, I understand. I felt the same way the first time that someone tried to explain how the mind games we play with ourselves influence the trades and decisions that we make. Let me break it down into more manageable pieces for you.<\/p>\n

Anything involving winning or losing large sums of money becomes emotionally charged.<\/p>\n

All right. You\u2019ve heard that playing the market is a mathematical game. Plug in the right numbers, make the right calculations and you\u2019ll come out ahead. So why is it that so many traders end up on the losing end of the market? After all, everyone has access to the same numbers, the same data, the same info \u2013 if it\u2019s math, there\u2019s only one right answer, right?<\/p>\n

The answer lies in interpretation. The numbers don\u2019t lie, but your mind does. Your hopes and fears can make you see things that just aren\u2019t there. When you invest in a currency, you\u2019re investing more than just money \u2013 you make an emotional investment. Being \u2018right\u2019 becomes important. Being \u2018wrong\u2019 doesn\u2019t just cost you money when you let yourself be ruled by your emotions \u2013 it costs you pride. Why else would you let a loser ride in the hope that it will bounce back? It\u2019s that little thing inside your head that says, \u201cI KNOW I\u2019m right on this, dammit!\u201d<\/p>\n

Bottom line: You can\u2019t keep emotions out of the picture, but you can learn not to let them control your decisions.<\/p>\n

To most people, being right is more important than making money.<\/p>\n

Here\u2019s the deal. The way to make real money in the forex market is to cut your losses short and let your winners ride. In order to do that, you have GOT to accept that some of your trades are going to lose, cut them loose and move on to another trade. You\u2019ve got to accept that picking a loser is NOT an indication of your self-worth, it\u2019s not a reflection on who you are. It\u2019s simply a loss, and the best way to deal with it is to stop losing money by moving on \u2013 and really move on. Moving on means you don\u2019t keep a running total of how many losses you\u2019ve had \u2013 that\u2019s the way to paralyze yourself. This brings us to the next point:<\/p>\n

Losing traders see loss as failure. Winning traders see loss as learning.<\/p>\n

Not too long ago, my twelve year old son told me that before Thomas Edison invented a working light bulb, he invented 100 lightbulbs that didn\u2019t work. But he didn\u2019t give up \u2013 because he knew that creating a source of light from electricity was possible. He believed in his overall theory \u2013 so when one design didn\u2019t work, he simply knew that he\u2019d eliminated one possibility. Keep eliminating possibilities long enough, and you\u2019ll eventually find the possibility that works.<\/p>\n

Winning traders see loss in the same way. They haven\u2019t failed \u2013 they\u2019ve learned something new about the way that they and the market work.<\/p>\n

Winning traders can look at the big picture while playing in the small arena.<\/p>\n

Suppose I told you that last year, I made 75 trades that lost money, and 25 that made money. In the eyes of most people, that would make me a pretty poor trader. I\u2019m wrong 75% of the time. But what if I told you that my average loss was $1000, but my average profit on a winning trade was $10,000? That means that I lost $75,000 on trades \u2013 but I made $250,000, making my overall profit $175,000. It\u2019s a pretty clear numbers game \u2013 but how do you keep on trading when you\u2019re losing in trade after trade? Simple \u2013 just remember that one trade does not make or break a trader. Focus on the trade at hand, follow the triggers that you\u2019ve set up \u2013 but define yourself by what really matters \u2013 the overall record.<\/p>\n

About The Author<\/strong><\/em><\/p>\n

More of Joseph Plazo’s killer articles:
\nhttp:\/\/www.xtrememind.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By Joseph Plazo – When it comes to trading on the Forex market, winning is a matter of the mind rather than mind over matter. Any trader who\u2019s been in the game for any length of time will tell you that psychology has a lot to do with both your own performance on the trading … <\/p>\n

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