Forex trading is not something to take lightly. If you truly want to be successful at forex trading, you must be prepared to invest the time and hard work to acquire the three factors for success – knowledge, experience, and emotional control.
Some of the crucial psychology reason are as follows -
Fear
Fear is very important factor in trading physiology
Several types of fear arise often in the course of trading whether consciously or unconsciously, these emotional responses include:
- The fear of failure
- The fear of missing out on potential profits
- The fear of losing everything.
Fear will often save you if you act quickly when you see that you are wrong.
Having a great trading system and all of the technical and analytical tools for success in trading is not enough to be successful. a trader has to have the right mindset. This can only be accomplished by learning to control emotional responses when trading and in all trading situations.
Hope
Hope can be one of the most damaging market emotions to a forex trader’s success because hope can keep a forex trader into holding onto a losing position in the hopes that the market will come back.
The market has already proven the trader wrong, but hope makes them stick with the losing trade, often leading to damaging results for their trading portfolio.
Greed
Like fear and hope, the emotion of greed is common throughout the forex market, and it basically is the excessive desire for more than you need.
Greed prompts you to act irrationally. For traders, this usually comes in the form of overleveraging, overtrading, chasing the markets, or holding on to forex trades you know you should’ve exited long ago.In many cases, greed can manifest in the common trading errors of overtrading and running winning trades into losers. When you think about it, greed is not that different from alcohol; it can make you act foolishly when you have too much in your system.
Overconfident /Excitement
The emotion of excitement can often arise after a trader has made a winning trade.
At this point, the trader needs to remember in the heat of that excited moment, that their success in trading over the long run will be determined by how disciplined they are in following their trading plan. The boost to their confidence may lead them to think they can do no wrong, and that can be when the problems start.
Lack of Discipline
Lack of discipline leads to emotional trading and is another of the major reasons why most forex traders fail. Unfortunately, more often than not, a trader that loses discipline will eventually lose money as well.
Trading without discipline is like gambling. Such a gambler might get favoured with a long string of winners, only to gamble away all of their winnings and more before leaving the table.
Unrealistic Targets and Goals
Another reason why most forex traders fail is because they have established unrealistic targets and goals. Always remember that the trading goals and target should be realistic as per your trading plan and investments.
Lack of Knowledge
Last not least the other factor for losing money in forex business is lack of knowledge Just as it is with any business, whether you are selling products or services, trading futures, or trading in the forex market, you need to know the business in order to be profitable. Never stop learning in this business.
The emotions of greed, fear, overconfidence and hope are some of the major reasons why most forex traders fail, with practise of discipline and dedication one can ache huge success in trading. Wish you all a very good future in trading and investing !
