Any Forex trader is always under a strong psychological stress during the work. This pressure is caused by strong emotions, which are experienced by a person: anxiety, fear, hope, greed etc. Under such pressure, a person often makes rash acts that directly affect trading. That is exactly why trading psychology is one of the key factors determining success of trading.
It is an open secret that the most part of freshmen coming to the Forex lose their deposit in their first trading year. Some statistics shows that in percentage terms it is up to 95% from all beginning traders. A bunch of material on technical analysis and recommendations on preservation capital are in circulation and novices primarily focus on studying these works. Forex psychology in their education program is considered an afterthought and fades in the insignificance. In practice, having a good knowledge of Money Management, excellent trading system and serious capital, novices get to lose all their capital.
To understand, why happens this way, we must focus on emotions experienced during trading. When a freshman opens position and market moves right direction, he starts feeling light euphoria. He sees how profit grows (which is not fixed yet) and falls into dream how this money will be spent. Account balance bar in the terminal is closely associated with amount of money in your purse, which is wrong. With such approach, a trader often makes errors: does not fix profit on time or ignores Close signals hoping to gain more. In the result, when market moves against, quite the opposite feelings occur: light panics in the beginning, then doubts and aggravating anxiety and when price approaches to an earlier preset Stop – a real depression. After that a novice can shift Stop considering that amount of loss is not serious indeed or cancel Stop at all.
As this example shows, emotions on Forex directly impact on success of results of trading. As experience grows, trader starts to learn to treat money in the terminal as product that can be bought or sold in the right way and not as live notes in hands. Discipline is worked out and trading is conducted as per earlier present and prepared plan rather than led by emotions. After that trading system starts performing and showing results it can achieve.
Trading psychology is one of the key factors determining its success. Therefore, time and efforts contributed in its study should not be less than those devoted to technical analysis.