When beginners start trading in the Forex market, almost all of them use a demo account. This allows them to learn more about the nature of this financial market and identify the patterns of behavior that work. At the same time, they can only experience the full range of emotions associated with Forex trading when working with real money. Most newcomers are overwhelmed with the tremendous excitement of winning. If the trade ends in a loss, it makes them upset, irritated, and even stressed out.
Constant psychological tension unsettles traders, which is why they begin to make more and more mistakes. Fear and greed can lead to a zero balance. Today we will tell you about the reasons why traders experience emotional shakiness and how to cope with the psychological factor.
Multiple studies of trading have enabled scientists to determine the number one cause of psychological stress, bordering on a nervous breakdown. As it turned out, the need to constantly monitor the charts is to blame. Strange as it may sound, it is the need to track price changes that exhaust the trader the most. In a sense, gamblers LIKE to follow the price action, eagerly waiting in anticipation of profit when they see the trend change in their favor.
Many traders have admitted that they often get more satisfaction not from increasing their account balance, but from monitoring an open trade. Dynamic price charts excite and get the adrenalin going. The need to experience the same emotions once more leads to a kind of chart watching addiction, and the trader keeps on doing this even when it is not necessary at all.
Constant monitoring of a price chart can be considered a kind of drug. It produces a feeling of euphoria and satisfaction. At the same time, such a habit is exhausting, and the trader begins to make unforgivable mistakes.
The financial market is volatile, so the profit and loss ratio will change constantly. The trader will experience either satisfaction or a dramatic drop in mood. This is emotionally draining and makes the trader inattentive and irritable. As a result, the trader sees signals to enter or exit the trade when there are none, and any rash decision leads to losses that will multiply in geometric progression.
To eliminate the emotional factor from trading in the financial market once and for all, learn the following efficient ways to deal with them:
Use of a longer timeframe.
Scalping is more interesting than daily chart trading. However, the latter will free traders from the need to constantly monitor the price, and accordingly, reduce the nervous tension.
Traders have to start their days by setting their goals. Let's say today's profit is 20 pips. And once these 20 pips are earned, they can safely close the terminal window and rest. It is a healthy habit to adopt: traders no longer depend on charts on a round-the-clock basis as the time spent trading is reduced. As a result, the psychological pressure also reduces.
Please note that it is important to set a loss limit for yourself so that serious losses do not get you stressed.
Lot size reduction.
The reality is that reducing the position size by at least 5 times allows traders to make more rational and sensible decisions. The thrill of excitement disappears and each trade is carried out in a thoughtful and precise manner. As a result, they begin to use logic when opening positions, to get a feel for the timely closing of their positions, and to interpret trading signals correctly. Only having developed these skills in yourself can you move on to trading with larger sums of money.
If you find it difficult to follow these rules and you feel yourself overcome with emotions, the best way is to use trading robots. These automated systems free traders from the need to participate in trading in the financial market. All they need to do is to enter their input data. Then the system will continue to operate autonomously, while the traders will get in a balanced state of mind and be able to continue to perfect their skills, developing new efficient trading strategies.
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