You Need A Forex Trader’s Mindset (Part II)
July 21st, 2009
Know the forex market. Greed is a form of fear which is the fear of missing out. So you need to control and face your fears in trading. The first step in overcoming fear is to recognize the various forms of fear connected with trading. The second step is knowing how to control those fears.Learn forex scalping. Get good forex training.
Why do so many people rush to the departmental store during the sales season? It is the fear of missing out. Any kind of buying mania stems from the fear of missing out. This form of fear is a kind of greed.
This fear manifests itself especially during a sharp rally or decline of a currency pair in forex trading. Suppose you are interested in choosing a good currency pair for trading. You see on your computer monitor that the EUR/USD pair is making new highs, as it keeps on going up and up.
Your heart starts pounding. Immediately buy, buy, and buy signals start ringing in your mind. You start feeling the acute pain of not being in the market when the EUR/USD pair continues to move higher and higher.
You start thinking, “Everyone is buying and I am not buying. I am losing out a highly profitable trade.” This fear of losing out hypnotizes you into placing buy orders frantically. You have some doubts at the far back of your mind but you simply ignore them.
This type of trading is very dangerous. It compels you to enter into a trend very late when most of the buying has been done. The mindset, “How can I not be buying/selling when everyone else is buying/selling,” is extremely dangerous. Be disciplined! Be glad to think that most of the traders are pouring dumb money into buying a currency pair that is already overbought.
Trading is a game. There will be winners. There will be losers. Sometime you win and sometimes you will lose some of your trades. The fear of losing out is the most prominent among the new traders.
Many new traders become victims of analysis paralysis. New traders become afraid of pulling the trigger when it comes to entering or exiting a trade as they fear losing money. New traders don’t yet have the adequate skills and knowledge to help assess and evaluate trading opportunities with a high level of confidence. This leads to trading paralysis.
Now you should not be afraid of pulling the trigger and being fearful of damaging the account based on only one trade. How to overcome this type of trading paralysis? Decide before entering into a trade, how much you can afford to lose. Use a stop loss order that is in accordance with your money management rules.
It is very easy for traders to oscillate between emotional high and low. The outcome of just one trade should not affect your overall performance. Do not get caught up feeling invincible or pessimistic after a win or a loss. Try to develop your own winning forex trading system that can give more winner than losers in the long run.