Everyone wants to generate a steady income. This goal is quite feasible if you start working in the financial market. While beginner’s luck is very common, in the case of Forex trading it can play a cruel joke with novice traders who ignore trading psychology and succumb to dangerous emotions and patterns, such as greed and gambling mindset.
Now, let’s talk about these two emotions in more detail.
Greed
For a trader, both beginner and professional, greed is a serious vice. It is because of greed that the trader doesn’t close a trade on time when he is still in the black. Greed makes you go all-in, betting your entire deposit. Greed prevents the trader from exiting an obviously unprofitable position, giving false signs of hope, that the trader can still win back his losses.
Greed overpowers the trader’s will and starts dictating his trading decisions. As a result, the trader starts moving his take profit with the direction of the price or doesn’t lock in his losses. He often increases the volume of the trade too.
How to deal with greed
- First of all, you need to reduce your leverage. This is one of the most effective ways to fight greed. However, some traders assure that lower leverage greatly interferes with trading and “ties their hands”. But in reality, by reducing the leverage, a novice trader will be able to avoid many problems and reduce the influence of emotions on his trading decisions.
- The second way to deal with greed is to set a profit target for the day. It is important to set a certain level, after reaching which the trader will be bound to stay away from trading for the rest of the day. For example, decide for yourself that once you make 50 pips of profit you will log out of your trading platform and forget about the market until the next day. This approach will allow you to reduce psychological pressure and not to let emotions cloud your judgment when making further trading decisions.
- To combat greed, you can also top up your account and increase the size of your deposit. Indeed, a small deposit and the desire to grow it as quickly as possible often leads to hasty decisions and trader blunders.
Gambling mindset
Trading is often compared with gambling. It’s very easy to develop a gambling mindset when trading in the financial market, and you need to do your best to prevent it from happening. While most professional traders have a solid trading strategy, they are disciplined and are used to sticking to their trading plan and observing certain trading rules, novice traders are more prone to develop a reckless, gambling attitude to trading. Many beginner traders are lured in the Forex market, excited by the promise of quick and easy money.
Emotions and Forex go hand in hand, it’s a part of our nature to react to things and get excited/anxious/greedy. But the more experienced a trader gets, the more he realizes the importance of logic and the ability to keep a cool head.
One of the most effective ways to fight a gambling mindset (when you get over-excited and want to open more trades with no particular reason when there’s no trading signal) is to simply walk away. As soon as a trader begins to feel that he is overwhelmed by emotions and excitement, it is important to stop trading, step away from your computer and do other things. You can go back to trading once you calm down and feel the peace of mind again.
Psychologists also recommend using this feeling of over-excitement to your advantage. When you get overwhelmed, try to channel this energy in a different direction. For example, you can do some physical activity (jogging, gym, sports, etc.) or channel your energy into your main job.
Let’s summarize. There is one important rule for all traders – keep a cool head when trading. It is imperative that you make informed, weighed decisions. Remember, traders who can’t control their emotions never stay “in the game” long and usually get their accounts wiped in no time.
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