Since I started forex trading for my own account, I very quickly became aware of the underlying psychological blocks to good trading and money management. This realization has been also confirmed by my mentor, my broker, as well as friends and colleagues who trade for their own living.
I sincerely feel that success in forex trading is approximately 80 percent psychological and leave only about 20% on one’s techniques and methodology – be it fundamental or technical. If you are in psychological control, but only have a mediocre understanding on fundamental and technical information, you can make a lot of money. On the other side, you may have a great trading system that have been tested and has performed well for a long period of time, but not in the psychological control, you will be the loser.
As you might know, unlike other social environments, the forex market has many characteristics requiring very high degree of self-control and self-trust from the trader who want to perform successfully within it. Unfortunately, most of us lack this behavior because of mismanagement on our childhood. As a child, we learned to function in a structured-rigid environment where our behavior was controlled by someone more powerful than ourselves. Parents most likely tend to manipulate our behavior just to conform to society’s expectations.
As a result, we were forced by external forces all the time to behave in certain ways through a system of rewards and punishments. We would be given the freedom to express our lives in some desired manner. However, we also would be prevented from getting what we wanted or inflicted with various forms of corporal punishment on the other side.
The only form of behavior control that we typically learned for ourselves was based on threat of pain from someone (or something) we perceived as having more power than ourselves. We naturally developed many of our traditional resources for success from the same mental framework. Accordingly, we learned that acquiring power to manipulate and force changes upon things outside of us was the only way to get what we wanted.
To overcome that problem, we need to readjust the differences between the cultural and trading environments. A new thinking methodology can not only redefine the market’s behavior in understandable terms to avert such mistakes, but also manage most emotional reaction to that behavior. These skills give us the necessary requirements to look at and behave toward events in a manner different from what we may be used to.
The fact is, you create your experience of the market in your own minds based on your beliefs, perception, interests, and rules. The market doesn’t create the ways in which you perceive it. It merely reflects what is going on inside you in any given moment. Your forex trading results will be a function of the degree of skills you develop in your ability to perceive the opportunity, your ability to execute a trade, and your ability to allow your account balance to grow over a period of time of trades.
Another thing that provides a foundation for the successful forex trading is a function of self-acceptance. Your intent of learning a new skills and way of expressing yourself is in essence an attempt to create a new dimension of yourself.
After all, the most important things is learning how to recognize and then clear out beliefs that argue for the status quo; then defend yourself against the intrusion of environmental information you refuse to consider; and learning how to read the environment in a way that will clearly point you to the right path,
A good forex trader knows from experience that over a period of time he/she may engage in more losing trade than winning ones. Money management is not only composed by risk management, but also psychological management. Risk management stems from the psychological factors being truly understood by the forex trader and “in place” before risk is even considered. It will keep the trader out of trouble and ensure that on the big moves, he/she will profit.
Nofie Iman is a full-time investor. He has been researching investment strategies since 1998 and makes his own living from stock investment and forex trading. If you are looking for information about expert’s forex trading strategies, please take a look at here.
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