Trading psychology is something that a lot of traders neglect and this is a major problem. When you neglect this aspect of forex rates trading you are blinding yourself to the mental aspects of trading. If you do not understand what the mental aspects of trading are then you will be unprepared for their impact. Trading psychology is about more than controlling your emotions when you trade forex rates. You need to consider how you can develop a trading brain and how this will help you.
What is a Forex Rates Trading Brain?
The first point you need to consider when you look at trading psychology is what a trading brain is. When you trade on the forex rates market you need to change the way that you view things and the way you complete tasks. A trading brain will be the part of your mentality that you access when you look at trading. This will have all the trading controls and discipline that you need for trading. If you cannot create a trading brain then you are not going to be prepared for the mental aspects of trading.
The Mental Aspects of Trading
There are a number of mental aspects of trading that you need to know about. The first is the impact of emotions on your trading. The second is the bias that you could be trading with. The third are the mental traps that you could fall into. It is important that you understand what all these mental aspects of trading are and how they can affect your profits.
The Emotions of Trading
When you trade there are two common emotions that you have to control. These emotions are fear and greed. While there are other emotions that you face when you trade like anxiety they can often be controlled by the reducing of these two emotions. When you let your emotions control you there are going to be losses.
Emotional trades are not based on facts and while they can make a profit in the short-term in the long run they will cause losses. Emotions will also cloud your judgement and cause you to make irrational trading decisions. There are a number of ways that you can look into that will help you control your emotions.
The Bias You Trade with
Trading bias is something that any traders could be using. These biases come from misconceptions of the market and emotions. You need to find out what the most common trading biases are and whether you are trading with them.
If you trade with bias you are going to make a loss. This trading is often blind to anything that does not fit into the bias trading. This means that you can easily be blindsided by something that you neglected to consider.
The Mental Traps
The forex rates market is an unpredictable market and this brings a number of mental traps. Some of the mental traps that you can fall into will be linked to emotions and bias. However, others will be due to the way that you view the market and trading. It is impossible to prepare for the mental traps through practice trading because of the lack of risks on a demo account.