Psychology of forex trading-How do experienced traders handle emotions?

[Justin Iheakanwa]

The Forex trading psychology of experienced traders are quite good and they do handle their emotions well. They exactly know when to trade the market and when it’s better not to trade. Below are the ways how they handle their emotions.

1) They don’t trade out of greed

Thus they avoids many things that will cause a stressful emotional response. And if they are really in fear or not in the mood to trade, they simply avoid placing trades. It is better than placing a trade and losing money, right?

2) They are aware of the uncertainty in Forex:

Experienced traders are aware of the uncertainty in the Forex market which is not the same as lack of confidence. It is just a fact in Forex, No matter how good your trading decision is, the market can unexpectedly go against your predictions at any time. If you clearly understand this while placing a trade, you won’t get a shock when the trade results in a loss. All you need to do is to be fully prepared to face the loss. There is a saying: Hope for the best but prepare for the worst. You have to be mentally prepared to accept the loss you face. This will certainly reduce the impact of negative emotions. The Awareness of uncertainty is another crucial thing to understand when it comes to Forex trading psychology.

3) They never expect quick profit:

This is also related to greed. What do novice Forex traders do when they want to make some quick money? They just place trades with huge trading volume and lot sizes. But when you choose a huge lot size, you are also risking a huge amount of money. While Forex traders who do this only consider one possibility and blinded by thinking how much they can earn if the trade goes well, they completely forget or ignore another possibility: If the trade doesn’t go as expected, they will lose a huge amount of money. Also, in a few more trades they end up losing their entire capital. Experienced traders never do this! They always follow a good risk management.

To sum up, understanding three important things about Forex trading psychology can make a big difference: Taking breaks when you are too emotional, always being aware of the uncertainty in the Forex market and practicing wise risk management.