Forex Trading System Psychology

Forex trading system psychology and the significant roll it plays is best exemplified by something I read a while back that stated 90% of all active traders eventually wipe out their forex trading accounts, while an astounding 10% of those undisciplined traders file for bankruptcy.

The reason copious numbers of forex traders end up in ruins is the absence of proper forex trading education. A forex trading system encompasses much more than learning how pivot points work or sketching lines on a chart. Enlightening your-self on the proper psychological approach to trade the market and judicious risk management techniques relative to your account size are far more important. You will also benefit from learning the right entry and exit points that best suit your trading style.

Widespread fallacies of forex traders run the gambit of thinking trades can be made consistently with near 100% accuracy without sustaining losses to delusions of quitting their jobs and earning a living full time after a couple of months trading.

The reason for the prevalent sentiment among forex traders, namely new traders, that trading is an easy road to wealth and untold riches… is marketing hype. With constant assertions in a variety of media that enormous amounts of cash is being taken out of the forex market just following the latest no-brainer trading system, most traders are doomed from the outset .

The mechanics of a forex trading system is not an exact science. Trading is all about probability. It’s a balance of the art and science of proper application of carefully thought out rules and allocating them consistently that result in profit.

Your success in trading forex has as much to do with the psychological approach as any trading system you decide to employ. Risk management is an element that is central to becoming a successful trader. In addition, utilizing a system that fits your individuality is vital to feeling comfortable trading in the market.

Invariably you will experience losses and they can easily affect you emotionally if you fail to realize it’s a cost of doing business. Ultimately, feeling comfortable with an acceptable level of calculated loss will generate net profits in the long run.

Most traders fall into two distinct categories, those who trade the breakout and those who follow the trend once established. There are also congestion traders, reversal type traders and mechanical signal traders but the vast majority fall into one of the two main categories.

Forex trading provides an arena where you get to compete with some of the best minds in the world on a level playing field when you learn how. Enjoy the challenge.