It is known in the foreign exchange trading world that traders need to be disciplined. The main problem in this environment is that trading is an insecure business, and most people need security in their lives. To ensure that you trade effectively, you need the right mindset. This is easier said than done because traders enter the market with a particular mindset. Trying to adjust these patterns is not only extremely difficult, but frightening as well.
A study was done which involved 120 traders who were provided with a proven system that had proved its worth over a long period of time. After one year, the study concluded with 119 failures. The conclusion that was drawn from the study indicated that these failures were due to the mental tendencies of the traders. The system was proven to be good, but the psychology and attitudes of the traders was not good.
Why Does the Foreign Exchange Trading Market Ignore Psychology?
It is known that most traders are males and they generally believe that psychology in trading is absolutely nonsense. They think that being rational, experienced and well informed will allow them to be successful in the market. However, according to Norman Welz, a journalist and psychologist, these traits will not help you if your brain is tuned and suitably programmed for the dynamic trading world.
How to Approach Psychology in Trading
You have to work on achieving the right mental energy and motivation. Each person enters this trading world with mental barriers and bridges that need to be overcome or crossed to allow them to succeed. Trading discipline can be achieved by modifying your behaviour in a specific direction. You need to overcome the fear and mental resistance that generally blocks your route to success. To achieve the correct trading brain you need to apply the correct mental attitude with the correct market knowledge and investment tactics. The main aim is to use all the skills that are required for successful trading, but use them with the right behavioural patterns and mental attitude.
To do this you will have to modify your personality to carry out effective trading. Many times you find traders who concentrate solely on the logical aspects of the trading market, such as trends and charts, however when the time comes for them to commence trading in the real market, they are flooded with emotions and are unable to trade effectively. These emotions overcome them and they lose track of all the logical aspects of trading.
This does not mean that it is impossible for certain people to become successful traders. Anyone can become a trader. It takes hard work to overcome the mental blocks that are already in place when you commence trading.
The role of psychology in effective foreign exchange trading is hugely underestimated. Too much emphasis is placed on the technical and logical side of trading. There is no doubt that both these sides are essential to make a whole trading brain. Learning the technical aspects of trading is far easier than training your mind to cope with the mental stresses and emotions of trading in this market. Finding the emotional strength to deal with losses, as well as with the elation and boost of profits can be difficult.