This publication aims to help fulfil the mission of “Applications In Life” Fondation to support and develop accessible and understandable financial education by improving financial culture and forward-thinking mentality of the civil society.

Psychology is a hot-button problem in Forex. Psychological aspects affect the performance of traders. Emotions often affect our ability to look clearly at the market and think calmly. Sometimes even high-ranking, very experienced and skilled traders fail to control their emotions while trading. Nobody is perfect. And we must say that the markets, these wicked capricious animals, tend to punish those who give in or those who overestimate their abilities. So traders need to be able to control their emotions so that they are not punished afterwards.

What are the dangerous emotions and which are they?

Panic, fear and anxiety

One of the worst enemies of traders is anxiety. It tends to convince them that they will not be able to make money, regardless of the strength of their trading strategy. So, instead of making big profits and making a lot of money, they do not initiate risky trades or leave positions earlier than necessary because they cannot wait for the realization of their initial goals. This is the most common mistake of novice traders.

In addition, people are not indifferent to their hard-earned money. They do not like to sit and watch their deals work against them. They will probably do something to seal the wound. And if they do not know how to act in this stressful situation, they begin to panic and take blows or miss actions that usually lead to financial losses. Periods of market volatility are the most common catalysts for such irrational actions. Increased price fluctuations lead to a loss of confidence in our choice of trade, we begin to question our trading strategies and try to change something at peak times.

Stay calm. Panic will only distract you. Don’t forget about your goals. Use Stop Loss and Take Profit orders. Once you have placed the protective orders in place, adhere to them.

Greed

Forex traders are money-oriented people. They want to make money and attach great importance to their financial success. Moderate amounts of such an approach are absolutely necessary. But if these healthy incentives / drives become unhealthy, they can cause financial losses. You need to learn to control your appetite for profit. Otherwise, you risk draining your pockets.

To prevent this from happening, you need to take a disciplined approach to your business activities that can minimize the role of emotions in our business decisions.

Euphoria

Sometimes traders fall into euphoria. They experience a strong sense of excitement and exaltation after a series of gains. They are looking to get more in the future and see a bunch of trading opportunities. In simple words, they make sure that they have managed to find a flawless profitable approach to Forex trading. But in the long run, they are disappointed because after the sun, the rain starts. The trader gradually begins to believe that no market analysis is flawless; that the next trade is not always profitable. The period of euphoria ends and the merchant becomes more cautious in his future endeavors.

Don’t get carried away. Know when to stop during your winning streak.

Getting in the right mindset to trade successfully

Rule number one is to stick to your original trading plan and follow the basic rules of money management correctly. Follow a certain methodology. Rely on logic, not impulse, because during impulse trading you will probably forget about proper risk management. You need to feel that you are playing the right game and not worry about the end result.

Don’t bury yourself with regret if the price continues to rise after you close your bullish position. The market is not going anywhere and there will be many other opportunities to make money.

Some authors talk about the “zone” – a combination of positive thinking, focused attention and adherence to trade discipline, which allows the best traders to continue to achieve exceptional results day after day, year after year.

Dealing with losses

Get used to the idea that losses will occur. There is no trader in the world who can make a profit from every deal.

Understand that you can’t go back in time and make your deal once again. It’s like going on a diet and eating a chocolate cake. Once you’ve eaten the whole sweet thing, all you can do is go back to the gym and start exercising to cope. It is the same with trade. Once you lose money, analyze why it happened, draw conclusions and use the knowledge and experience gained to improve your trading system. Don’t think you have to get your lost money back. Accept the loss and move on. Your goal must be not to compete with the market, but to make money on Forex.

Becoming psychologically strong

Accept the fact that good trading results require hard work. If you do not delude yourself that you will get huge profits in no time, you will protect yourself from unjustified disappointment and you will be able to focus on your goal. Remember that Thomas Edison did 2,999 experiments before inventing the light bulb.

Relieve your stress. Take breaks from trade and occupy your mind with something else. Live a healthy life with sports or at least walks and good food. Spend time with family and friends. All this will help you relax and have more strength to trade.

Find some fellow traders to discuss your fears and concerns. Talking will help you get rid of stress.

Constantly increase your knowledge of trading and the Forex market. Attend courses, read books and articles, learn from professionals. The more you know about trading, the more psychologically healthy you will feel.

The winning formula from Linda Raschke

The well-known trading coach Linda Rashke in her book “Professional Trading Techniques” invented a special formula for successful trading.

So to earn more in Forex:

• Passion – you need to have a driving force to motivate you to succeed.
• Faith – You must believe that you can achieve your goal.
• Game Plan – You must have a strategy or business plan to attack your target. Lack of organization and preparation is the main reason for unsuccessful deals.
• Integrity – you need to develop your personal value system.
• Commitment – you must remember that commitment opens up an unlimited source of energy reserve within us. It gives us the strength to keep moving forward every day, even if we see no progress.