Put two different players together and give them the same trading plan in the same currency pair. After some time one trader will lose all the money while the other one will enjoy benefits of trading in forex. What is the difference between them? The answer is market psychology. Have you heard about the psychology of the market? It consists of 3 elements which are fear, discipline and excitement. We will discuss this in greater detail here:

Fear

The emotion of fear makes many traders take up stupid decisions. Have you ever felt the pangs of fear? You feel your heart beating a little faster, your hands are cold and there is increased blood pressure. Many traders feel fear when trading, this is unavoidable because their own money is at stake and that means it is personal. And when things become personal human beings on the defensive and the feeling of fear sets in. Fear of loss, fear of being wrong, fear of failure and fear of looking stupid these are some of the fears that the assault dealer for a trade. It may not be aware of it, but these fears exist in your subconscious when trade and play an important role in future decisions. That’s not a good thing … Fear is the worst enemy of most traders.

Emotion

Next in psychology is enthusiasm. The symptoms are very similar to fear. The difference is that fear produces doubt, while the excitation leads an investor to take more risk. The thrill is when a trader thinks the trade is a winning business. It will affect greatly the merchant, because when the trader assumes that since trade is a win, more risk can be piled up. The rules are broken and ultimately lead to a loss. The problem arises when a trader swings from fear to emotion and then back again. The market goes up and down, so if you watch time the market goes against your trade experience this great change more negative than positive. Only the image of wrecks havocs on your mind! You can not expect it to work properly with all the emotion running on you! Most accounts are lost due to this swinging, sad to say that many operators did not know this.

Discipline

A disciplined trader is a good trader. Above we spoke of the emotional swing. To prevent this from affecting you and your account, discipline is required. The discipline can be acquired by custom and practice. This is a good way to maintain an adequate daily trading. Without discipline, you can not wait to trade and be profitable at all.

Finally, now that you’ve heard of psychology, take time to reflect on own past behavior. Have you been influenced by emotions when trading?

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