Psychological Pitfalls in Forex Trading Srategies That Work.
The desire to be a millionaire in a day
The desire to be a millionaire in a day manifests itself in many ways. The main ways are fear and greed and they inevitably lead to other problems. If you think about it, the majority of the issues newbies have stem from the desire to be a millionaire in a day. Instead they should be focused on proper Forex Trading Strategies That Work, but they get carried off with things such as
- Poor Money Management by risking too much
FOREX TRADING will not make you a millionaire in a day. It will likely take some time before you are trading well.
FOREX trading is a career in the long run, if you are successful, it can give you a very relaxed life.
Fear of losing
From a young age, we are taught that money is important and that without money you have no real value. We are conditioned to believing that to be successful when we grow up, that we must have lots of money. This is because the reverse is also true. If you lost money then you are a failure as it is the opposite of making money. This, in turn, leads to some newbie traders being afraid to pull the trigger and actually take a trade.
Some newbies trade demo accounts for two years, never summoning the courage to open a live account. Some newbie traders with live accounts panic whenever they enter a trade and in turn make rash decisions.
Take a look at people like Richard Branson, Donald Trump, Alan Sugar and Warren Buffet. These guys are billionaires (or close enough to it) and each of them has failed many times. Richard Branson has spearheaded many failed ventures. Did those failures set him back though? Hell No!
I think losing some money to the markets is actually beneficial. It teaches you some very important lessons. What is damaging is the fear of losing money. The fact that you think about it puts you at much greater risk of it actually happening. You have to trade with a positive attitude and with the right forex trading strategies that work. So get rid of those fears and worries, they will not do any good to you.
The truth is that you are going to lose money in the markets, it’s unavoidable. Every professional trader has lost money. Not every trade will be profitable. The market simply doesn’t always work in your favour, and there are times especially as a newbie, that you will be stung. If you end up blowing your first live account … so be it. As long as you pick yourself up and try again, you will be a better trader for it.
The need to be right
This is a good one. Peter opens his platform and enters a dumb, baseless, long trade. He targets 100 Pips and has a 50-pip stop loss. The trade goes against him immediately.
It goes down, first ten Pips, then twenty Pips, and then thirty Pips. When it reaches forty Pips Peter decides he doesn’t want to lose another trade and moves his stop-loss down.
The price keeps falling:
Eventually, Peter closes out his trade and he has lost a huge portion of his account.
Peter was not able to accept that he has taken a losing trade. He kept pushing the stop down in the hope that it would eventually turn around. The need to be right is an account killer.
At Platinum Trading Systems, as you are aware we use fixed stop losses 20 Pips for intraday and 35 Pips for a long term and these are line with my RISK MANAGEMENT targets and ATR’s for stop losses. In addition, sometimes during a “SQUEEZE”, they are moved to accommodate the increased level of volatility.
I saved this one for last because, even though it is one of the most common and dangerous pitfalls, it is rarely discussed. A trader who lacks discipline can never make it in this business. Many traders are guilty of lacking discipline for many reasons.
The main culprits are what I like to call “System Jumpers”. These are the traders that are constantly tweaking and changing their trading methods. These traders do not realize that learning to trade a system efficiently takes time.
System Jumpers are traders who lack discipline to stick to, and learn how to trade a system. They try it for a week and when it doesn’t work they jump to the next system or method. Another common action of an undisciplined trader is abandoning a perfectly good forex trading methods. Every trading method has period in which it performs below average. No matter how versatile a method is, it cannot perform at peak efficiency in all market conditions. A true trader has the discipline to stick it out through hard times and to the forex trading strategies.
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