The Practical ways to balance your trading psychology
Are you still finding it hard to put yourself to order when trading? A lot of traders today are still struggling to balance a good trading psychology; some are even scared to do so.
According to DailyFx Research team, about 43 million real trades were looked into-in other to measure the performance of traders.
Furthermore, David Rodriguez a quantitative strategist, highlighted in the article ‘’Why do many forex traders lose money?’’- The biggest mistake Forex Traders make, and one of the factors discussed was the human behavior.
Why Does the Average Forex Trader Lose Money?
The average forex trader loses money, which is in itself a very discouraging fact.
But why? Put simply, human psychology makes trading difficult.
We looked at over 43 million real trades placed on FXCM’s trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain.
Let me start by explaining what forex psychology is all about. A lot of Fx-psychologist has defined psychology in so many ways. According to Investopedia -‘’ Trading psychology refers to an aspect of individual’s mental makeup that help determine whether he/she will be successful in buying and selling securities for profit.
Psychology is simply describing your mental state, which is the state of your mind when trading forex. It is not something you have to joke with, it is a discipline you have to build- if you really want to make a living out of FOREX.
Do you really know your trading psychological state?
It is very important that you know yourself well.
Here are some tools to test yours;
- Are you the type that has mind-war whenever you want to trade?
- Are you the type that easily gets carried away when making positive pips?
- Are you the type that fears whenever you want to place an order?
- Are you too over-confident?
- Are you the type that opens and closes trade instantly?
- Are you a trader that trades with emotions?
- Are you a calm trader at all?
Well, these tools above will help you in accessing your true self as a trader. Many are actually falling victim of this not because they don’t know, but because they don’t really want to handle this-psychology with full seriousness.
Here are possible results from imbalance psychology (IP) when trading;
- Confusion is inevitable.
- Lack of concentration.
- Self pity is liable to arose.
- Too scared to trade.
- The trading account is definitely going to be in trouble.
There are also lots of benefits you stand to gain from trading with a balanced mindset, especially when you are emotionally-detached.
Some years back, a guy asked his coach a question, ‘’ sir I’ve developed a good trading system, and I’ve been making profits from it for the past two weeks. What else do I have to do to become a successful trader?
His master-It’s wise of you to know that something vital is missing about your trading plan. If you can balance your trading psychology (TP), then you are almost there.
Mr. Mark being the guy in question, subscribed to the advice .having worked on his TP, he is now able to control his emotions, fears and also maintaining discipline when trading.
From the case study, here are some of the possible outcomes from trading with such human behavior;
- He has secured a professional trading plan.
- He is in charge of his emotions.
- He is certain with whatever decision/order he makes.
- He has confidence in his analysis.
- He is focused and highly disciplined.
However, there is no doubt that trading with a balanced mental state is very important. But the issue here is ‘’how do we go about it?’’
Here are practical proven ways to achieve it;
#1 Take Total Charge of Your Inner State of Mind.
The question is –what is my inner state?
Your inner state covers every part of you that is connected to your mental state, such as: your fears, emotions, anxiety etc. your best can’t be achieved if your inner state of mind is at war, and if you really want to make a living trading, you must balance your TP.
How do I balance my inner state?
You can, firstly you have to identify and understand the effect of all the forces acting on you within using the test tools I mentioned earlier. Having the knowledge of these inner forces will guide you in finding their different solution.
However, dealing with this problem will definitely provide you with great relief while trading. Don’t be ignorant of working on your trading psychology.( To know more about TP-read on The Four Demon of Trading Psychology. )
#2 Build a Positive Mindset About Forex
Another practical way of solving this problem is by building a positive view towards fx-trading. When your view/sight about something is positive, you’ll hardly experience mental disturbances towards it.
If every thought of yours towards trading is positive, then psychologically you have arrested those forces acting within you. Put in your best in working towards it-you’ll definitely achieve it. Stop dwelling in negative thoughts, it will definitely weigh you down.
“Don’t hang with negative people. They will pull you down with them. Instead, invite them into your light and together you will both shine strong.”-L.F.Young.
In summary, a trader must make sure his or her trading psychology is well balanced before trading.