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Basics of Trading Psychology

by Seerat Fayaz   ·  October 1, 2021   ·  

Basics of Trading Psychology

by Seerat Fayaz   ·  October 1, 2021   ·  
Whether it is forex trading or any other form of trading which involves highs and lows, the trader’s mindset plays a vital role in his moves. Abrupt and instinctive decisions may not be fruitful in the long run as it is not a lottery. Proper analysis and strategy are required to become a successful trader.

Every move in the forex market will either benefit you or prove to be a loss for you. It can be quite stressful to handle all ups and downs but if you are really into trading and want to make it work, you should set up your mind in that way.

Trading psychology involves all the emotions that a trader experiences when he is either about to make a crucial decision or when he has gained or lost in the market. The most prevalent emotions that every person dealing in trading will experience are fear, anxiety, nervousness, and greed.

Fear is a constant feeling when you are trading either in forex or in shares. You don’t know what the coming time is going to bring you. You may make a decision and would be frightened about the results. This may keep you away from making the right decisions and giving all that you have learned a try. So, it is important to overcome your fears and make stable and sensible decisions. In our perspective, a person fears something he is not good at or something he is not completely aware of.

We suggest you completely know about all the basics, the tools of technical analysis, and the various strategies that can be deployed in the forex market. Once you are aware of all the possibilities of your moves in the market, you will automatically observe that the fear recedes away.

There are times in the trading market when you have to decide in a very short time. You don’t get to think for some hours, it is a matter of some minutes. In that case, you encounter feelings of nervousness and anxiety. When we have to make decisions in a very short duration of time, it is possible that we make decisions without thinking properly or maybe very instinctive decisions. We cannot completely avoid this situation and we need to get used to it.

A trader should keep an eye on the market and the trends even when he is not placing an order. If you know what has been going on in the market before and you are already predicting some things for the near future, it becomes easier to make decisions in a short interval of time.


Greed and excitement are the two emotions that will arise when you think things are going well and will continue to go on a high note for some time. You may want to make the most of the time and exceed your limits. This is a situation in which you need to handle your emotions and stop yourself from incurring huge losses. A trader tries to buy more and more in such a situation and forgets about the counter effects that can have on his account.

To handle this emotion, a trader should put a limit on the number of pips he can afford to lose and stick to it. Whatever comes up, always stick to the strategy you have formed for the long run. Making huge profits at once is not a viable expectation and one should believe in shorter steps and consistent profit rather than abrupt and huge profits.

Awareness of the pros and cons is very important for a good trader. Even an experienced trader loses money at some time or the other, these outcomes should not have an impact on the confidence of the trader. Uncertainty is an unavoidable part of the forex market. A good trader should be mentally ready to incur any loss.

While you place an order, do the analysis and look at both sides of the coin. Estimate the amount of profit you may get and then estimate the amount of loss you may have to incur. Do not make instinctive decisions hoping that the things will turn in your favor only, the reverse can happen as well. So, it is better to prepare yourself for the loss and then make a move. Profits and losses are like the two sides of the coin in trading. A good trader remains mentally stable regardless of the outcomes of his trade.

A trader who is new to the forex market is most likely to incur huge losses if they are not proceeding with caution. Prevention is always better than cure. Most of the people move into the trading area with the thinking that they will convert their $1000 into $1000000 anytime soon. Some may make the mistake of investing all the input they have at once. All this happens due to a lack of experience and ambiguity of the basics of forex trading. Blowing up all your account balance just to make one trade is a big no. Look for a reasonable and sensible strategy and its yields before you starting making purchases in the market.

Along with the basics and trend analysis of the forex market, a trader should learn risk management as well. There are many risk management moves and strategies that one should know about and follow. Using stops and limits and familiarizing yourself with the concept of leverage may be a good start.

If you are new to the forex market, we suggest you set up a demo account for a while and get a good grasp of the market before you start risking money. Stay updated about the news and events to make wise and informed decisions.

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