Psychological aspects necessary to operate in the Forex market

One of the most important aspects and at the same time most ignored by traders is maintaining a healthy psychological perspective with respect to trading. The psychology of trading together with risk management is one of the pillars on which professional traders base their success in the market. In fact, investors who are not able to control the stress produced by market variations will not survive as long-term traders, no matter how skilled they are or their knowledge of market analysis tools.

Emotion-free trading

It is essential that the trader make his decisions regarding the market based on objective strategies in such a way that eliminates the interference of emotions such as greed and fear whose effects can be fatal because they cause the person to make bad decisions. One of the characteristics common to all professional traders is that they can achieve a complete emotional detachment with respect to their transactions: although they are involved and dedicated in their operations in the market, they do not reach the point of committing themselves emotionally to them, that's why they accept No hassle losses and they make all their investment decisions in a completely objective manner.

Frequently, traders who become emotionally involved with their transactions often make important mistakes because they tend to change their strategy capriciously in the face of a few losses or on the contrary become very careless and overconfident after getting a few. winning operations. A successful trader is one who has emotional balance and who bases all his decisions on an objective strategy that applies in a disciplined and emotion-free manner such as greed and fear.

The professional trader knows when he should take a break

When a trader suffers an important losing streak, he should consider taking a rest period from trading before fear and greed come to dominate his trading strategy and drive his decisions. It is important to understand that not all transactions will produce benefits. Therefore, the trader must be psychologically capable of understanding that at some point he will have loss which he must manage properly.

The vast majority of traders, even the most successful, at certain times go through periods of losing trades. This is not unusual. Therefore, the key to becoming a long-term winning trader is to have the ability to overcome a losing streak without being disturbed. At the moment in which a trader goes through a negative streak in which he experiences great losses, it is probably best to take a break from trading.

Normally, staying a few days or even weeks without observing the market allows you to clear your mind and may be one of the best solutions to a losing streak. On the contrary, continuing to perform non-stop operations during a complicated market condition can not only produce high losses but also affect the psychological state of the trader.

Finally, it is always better for the trader to recognize his losses instead of continuing to fight against them and acting as if they did not exist. It is vital that the trader understands that no matter how much he prepares and practices, during his career in the market there will be many losing trades. The key to success is to make these losses so small that the trader keeps enough capital in his account so that he can operate another day in the market and can leave his winning transactions open for longer.

The fact is that a trader can overcome any losing streak with proper monetary management techniques . This is the reason why the experts emphasize the use of a 2: 1 risk to profit ratio in their operations, as well as not risking more than 2% of the capital of their account in a single transaction. With these practices the losses can be maintained at an acceptable level.

For traders that operate in the Forex market or with other instruments such as shares or Futures, the following are 10 basic rules that every trader should follow:

• Let your profits run.
• Limit your losses as much as possible.
• Do not fight against the trend.
• Hold positions with an appropriate size according to the capital of your trading account (monetary management).
• Apply an adequate benefit-risk ratio.
• Do not add to the losing positions to compensate, on the contrary if a position is generating excessive losses close it.
• Analyze and take into account the real expectations of the market.
• Capitalize appropriately on your profits, do not allow a winning operation to lose a high percentage of the potential profits produced or end up causing losses.
• Use a trading booklet and learn from your mistakes.
• Set a maximum loss or recession level for your earnings. If you reach this point, consider resting and staying away from the market for a few days.