3 Psychological Forex Trading Mistakes that Destroy your Chances of Success

psychological mistakes

Many online traders tend to develop obsessive tendencies that take over their forex trading experiences and actually destroy them. What was once a carefully executed activity is now an obsession, resulting in compulsive behaviour that only fuels trading losses.

Listed below are 3 psychological FX trading mistakes that destroy your chances of success:

The desire to understand everything

The forex market is the biggest market in the world, generating trillions of dollars a day in trades. This magnanimous market runs 24-hours a day, 5 ½ days a week, while there is endless data associated with the forex market.

If you feel compelled to know and understand every single aspect of forex trading, then you are committing one of the major psychological forex trading sins. Many extreme variables, such as indicators and economic data, give conflicting signals which often lead to confusion and internal conflict.

There is no way that you will ever truly understand the inner runnings of the forex market and once you try to, you will overwhelm yourself and destroy your chances of success. Instead, focus on the information that matters. Use technical analysis and never stray too far from the charts. All the information you need is contained within the charts, provided you look closely enough.

Inability to switch off

It’s easy for forex trading to become an obsession. The market never sleeps; your trades are constantly running, and the desire to persistently check the market and review your open trades might never go away.

If you’re thinking non-stop about the forex market and feel compelled to constantly check your trades, it’s time to take a step back and assess what’s going on. Remember that quality is more important than quantity and that the market will always run no matter where you are or what you are doing.

Micro-managing trades

Once you set a trade do you feel compelled to sit and watch its every move? If so, you are committing a psychological forex trading mistake. Micro-managing your trades is counterproductive and can lead you to make irrational trading decisions. Instead, force yourself to take a step back and allow the trade to run its course. Trust the market to take control of the trade; in the meantime, keep yourself busy and distract yourself with a different hobby or activity.

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Forex Trading Sins: Fighting the Urge to be Perfect

how to overcome the urge to be perfect when trading forex

Forex trading is a fast-paced, stimulating and edge-of-your-seat activity. You never know what direction the market’s going to travel in from one moment to the next, and this exciting market can either reward you financially or can drive you crazy.

Many people can handle the fast pace of the market, while others fall victim to it. Those traders who have the urge to be perfect and can never accept the error of their ways are not likely to survive very long on the market. These personalities are always blaming something (mostly the market) or someone for their forex trading losses, and are quick to point the finger rather than admit the error of their ways.

However, FX trading losses are an inevitable part of the trading game, and there is absolutely no way to avoid them. If you cannot accept FX trading losses, then consider yourself a spur-of-the-moment revenge trader whose forex trading account balance is likely to cripple very quickly. Your career on the market will be short-lived while your finances will quickly dry out as a result of your poor trading attitude.

How to Fight the Urge to be Perfect

there's no point in trying to be perfect when trading forex

 

To overcome the urge to be perfect, it’s vital that you place stop losses on each and every trade that you execute. If you don’t, you will end up clinging on to a trade as it travels further and further against you. Your trades will become unplanned and unsafe. Your ability to think rationally will slip through your fingers as you trade with your heart and not with your head.

Forex trading is not an IQ test. There is no need to be ‘perfect’ or right at everything. In fact, some of the world’s leading traders lose many times before placing a successful trade. Their lose-to-win ratio is heavier on the losing side, but they still manage to remain afloat and make money from their trades.

One of the world’s most renowned traders, Richard Dennis, amassed a huge fortune and trading record, despite getting 95% of his trades wrong. Through persistence, hard work, patience and determination, forex trading success is much more attainable than you think.

 

Profitable Forex Trading: Can I Beat the Market?

make a profit

There is no magic formula to winning big on the foreign exchange market. It takes a number of traits to successfully tackle the market including an almost infinite supply of patience. In this respect, with the right attitude and approach to online forex trading, you can tackle the market and make a profit.

Below are some top tips that you should adopt if you wish to ‘beat’ the market and make a profit:

  • Revise

Improving your forex education is the first step to a successful forex trading career. Take advantage of the abundance of resources available to you, both online and offline. Consider attending a live FX trading course where you will be surrounded by enthusiastic traders and teachers who are all determined to succeed. Here, you will enhance your FX trading knowledge and improve your confidence on the trading platform.

  • Establish

Establish a forex trading strategy that suits your trading personality. There are endless trading strategies to choose from and most successful traders develop a trading strategy that suits their individual trading style and personality.

  • Practice

The next step is to practice everything you have learnt on a demo trading account. The process of practising on a demo trading account should never be rushed: many successful traders spent months or even years preparing themselves for live currency trading – the market is always going to be around so never rush to the trading platform without practising, practising and practising again until you have perfected your trading strategy with precision.

  • Seek

Choosing a forex broker is a big decision but ultimately one that can make or break your career as an online trader. Fortunately, there are plenty of online forums to help you find the right broker for you. Which trading platform is available? Do they offer the currencies you wish to trade? Are they open to all trading strategies? Also take into account how competitive their spreads are, as well as the level of client support provided.

  • Find

Find your informational and behavioural trading edge. Informational edge involves educating yourself on a deeper level with fundamental analysis. By following forex news, you will gain a more holistic understanding of current market conditions, which will refine your trades considerably. A behavioural edge means performing technical analysis on ultra-short-term time frames. Having an edge is an ongoing process but one which gives you the opportunity to adapt to changing market conditions as and when they present themselves.

How to Remain Focused on the Trading Platform

Read on to find out how to stay focused while trading forex

Remaining focused while trading forex is one of the most important elements of your forex trading success. As soon as you allow your mind to wander, you run the risk of making poor trading decisions, which can quickly jeopardise your forex trading success.

So how can we maintain our focus, even in the midst of a very stressful trading experience? Read on to find out…

Limit Distractions

When you trade forex you need to have very few distractions around you. Make sure that you won’t be disturbed while trading. Leave your mobile phone switched off or place it in a different room. Close all tabs open in your internet browser except for those that will help you with your trades. Never leave social media pages open as the temptation to check your pages might be strong.

Tidy your Workspace

limit distractions to improve the quality of your trades

A clean workspace allows for a clear mind, so tidy up your workspace before getting started. Keep your desk organised and only have items there that will contribute towards your success (such as your trading strategy and journal).

Tidy up your Trading Platform

In addition to tidying up your physical workspace it is also important to tidy up your trading platform. Remove any superfluous indicators, keeping only the most important data and statistics present on the screen. Make sure your colour-coding system is clean and consistent. This will ensure that you do not become overwhelmed when you start trading.

Don’t Let your Mind Wander

focus

When you enter the trading platform you need to be as focused and present as possible. When you notice your mind wandering, bring it back to the trading platform. Refer back to your strategy and your plan, ensuring that you are trading in complete harmony with them both.

Have a Solid Risk Management Strategy

Having a solid risk management strategy helps you to stay focused on the trading platform as you won’t enter a state of panic as soon as the market turns against you. Your stop losses will protect your forex trading account from experiencing any major losses.

Accept the Market

Finally, accept the forex market for what it is. Perhaps you’ve just entered a trade that you think will be highly profitable, but in actual fact that trade ends up turning against you. It’s important to accept that the market ebbs and flows and these movements are completely out of our control. All we can do is plan our trades well, perform accurate technical analysis and remain calm and focused whilst trading.

A Market that Never Sleeps: A Week in the Life of the Forex Market

The forex market: open 24 hours

The forex market typically gets going first thing on a Monday morning in Wellington, New Zealand, when the first financial centre in the world begins the trading day. It opens up the market once again after currency trading markets closed for the weekend in North America on a Friday evening. From here until the end of the week at 5pm Eastern time, the markets will remain open for business.

The Three Trading Sessions

Forex trading is divided up into three sessions. These are:

  • Asian/Tokyo
  • European/London
  • North American/New York

There is always some overlap throughout the day for the opening and closing times of these major financial centres. And although the market is divided up into these three major sessions, there are always other regions participating in forex trading. As already mentioned, New Zealand is a market participant and opens up well before Tokyo begins trading. Furthermore, countries such as China, Singapore and Australia are also major international market players.

A Breakdown on Asia

The Japanese Yen is the most important and active currency during the Asian market

 

When the Asian session is open traders are watching closely for important economic data to be released from the region, such as GDP releases pertaining to currencies in the region, or China’s Consumer Price Index. During these releases traders watch very careful for developments that could have an impact on the other markets that will open later in the day.

The biggest and most important currency that is active during this session is the Japanese Yen. During this session there is a great deal of activity taking place on AUD/JPY, EUR/JPY and USD/JPY.

A Breakdown on Europe

Trading activity is very active when the European market is open

 

As Asia’s trading day is coming to a close Europe’s is just opening. This is an important session as it overlaps with both the Asian market and the North American market some at point during the course of its day it.

While the European session is open, trading activity is very active, with liquidity being incredibly high during this period. Although London is the biggest market player during this session, at this point other major European financial centres are contributing to trading activity, including Germany and France.

Economic data about the Eurozone, the United Kingdom and Switzerland have the biggest impact on price movements during this session. A lot of activity is taking place on EUR/USD, EUR/CHF, EUR/GBP, GBP/USD and USD/CHF.

A Breakdown on North America

 

At the start of this trading session trading activity is at its most active (in terms of volume and price movements), as the European market is still open and major economic indicators are released from the USA. Trading comes to a close every Friday at 5pm Eastern time in New York, until business continues once again on a Monday morning in Wellington.

The Anatomy of a Successful Forex Trader

Trading forex has a certain element of mystery to it, since there is no exact formula for successful forex trading. To achieve success a trader needs to possess many skills, as outlined below. If you possess some (though preferably all) of the qualities outlined below then you stand a strong chance of making consistent profits on the trading platform…

Mathematically Minded

Being mathematically minded is a characteristic of a successful forex trader

A successful forex trader has a mathematical mind and is always on the ball. This person is quick with calculations and is able to make spur-of-the-moment trading decisions based on calculated decisions that are rapidly carried out.

A Competitive Character

If you want to be good at forex trading it helps to have a competitive nature

 

A successful forex trader is also a competitive character who is persistent by nature. This individual is not afraid of competing against his or her peers and is wholeheartedly dedicated to his trades irrespective of the ups and downs he’s going to experience.

Clarity of Thought

If you are mindful you stand a better chance of being a consistently profitable trader

Such a trader also has a clear mind and is able to maintain focus very easily. Whether for a short-term trade or a longer, more challenging trade, that individual never loses focus or allows his mind to wander from the task at hand whilst present on the trading platform.

Rational Thinker

the thinker

A successful trader is also a rational thinker who does not chase losses. He remains calm under pressure, calculating his next move very carefully or simply exiting from the trade if the circumstances cannot prove profitable.

Patient

Patience is the number one ticket to forex trading success as without patience your chances of closing a highly profitable trade are very low. It can take hours or even days for a stable trade to suddenly turn profitable, and having the ability to ride the wave towards success is certainly a prerequisite.

Other attributes that a successful forex trader requires include:

  • Excellent money manager
  • Excellent record keeping habits
  • Evaluation of risk to reward
  • Ongoing learning and knowledge development
  • Development of a strategy that they are continually refining
  • Discretionary judgment skills

If you think you’ve got what it takes to succeed then open a forex trading account today and begin your journey towards forex trading success!