Profits and Psychology in Trading

Profits and Psychology in Trading

What determines the profitability of trading on the forex market or binary options – Psychology or trading strategy? Probably both in equal proportions.

But, a lot is said about profitable trading strategies in forex and binary options, the trader's personal experiences and other psychological aspects that prevent you from making a profit in the market.

Let's understand the extraordinary importance of psychology in trading for everyone who is interested in making a profit in the forex market, binary options or other financial instruments.

One Approach - Different Results in Trading

 Maybe no one has learned to control their emotions 100%. Emotion is a prime quality that distinguishes a human being from a mechanical trading system.

Trader emotions can cause more than 60% of errors in trading! Therefore, not only correctly chosen negotiation tactics predetermine the course and outcome of the negotiation. Equally, this applies to psychology in accomplished trading!

These are not empty words, but statistics confirmed by practice! There is a simple example for this.

Different traders using the same trading system can get completely different trading results. This, as best as possible, confirms that psychology is of paramount importance in the process of making a profit in the market.

market sentiment

Therefore, it is emotions that govern the Forex market's trading platforms. This is a proven fact, which is described in detail and proved by Dr. A. Elder in the book “Trading with Dr. Elder“. Crowd Psychology – It is this factor that determines in which direction Forex asset quotes will move. At the same time, each individual trader's profit depends on how flexible he can adapt to the market's emotionality and manage his own emotions. After all, about 50% of success depends on the psychological component in the negotiation.

The only element that drives price action more than any other is investor opinion.

Psychology in Trading

We all understand this, but we don't give it enough importance. As a result, the trader receives financial losses caused solely by his emotional state.

At the same time, we are used to blaming these losses on the imperfection of the trading strategy, completely ignoring the problem, which in the future will prevent us from achieving success.

After all, if trading psychology is not given due attention, mistakes will be repeated regularly and we will continue to incur losses. And this is a problem that calls into question the desirability of our trading in general! And this is an opinion expressed not only by Dr. Elder, but by all successful traders without exception!

Forex example

In order to demonstrate how important trading psychology is, consider a simple example below:

On the trading platform, a trading position is opened, the trader is enthusiastic – he has received a profit for a long time. Though before that, your forex trading system showed average results. The price many times, not reaching the take profit level, had a reversal, which caused losses.

But there were also profitable deals. And now – a new trade underway, prices are finally moving towards profit and apparently nothing could stop the gains.

But halfway through take-profit, traders begin to fear that the price will turn in the opposite direction, as always, in their thinking, it will again take a loss. The only correct decision now, in the trader's opinion, is to close the deal with the current positive result.

Profits and Psychology in Trading

About a month later, while analyzing his trades, the trader was troubled by the lack of profitability, examining his trades in the quote history, the trader noted that most of the deals closed manually hampered his profitability. That is, if he hadn't closed his trades manually, he would have received 50% more profit on various positions.

The result is that your trading system is not so bad. Instead, the problem is not with the system at all, but with the trader's psychology.

Your fear of loss in Forex often precludes making a profit! And everything seems clear, and the trader concludes – I manually closed my trade again without waiting for take profit!

“Take Profit” is an order placed on the trading platform that allows the fixing of a profit level when the price reaches a certain value. This command serves to reduce the risks of auto trading.

Trading Psychology – Why is it Important?

To be a professional trader, we need to have control over our emotions and have logical thinking rather than momentary intuitive impulses. You can't let emotions get the better of you!

Compared to other human activities, trading is characterized by greater unpredictability. And that's exactly what our psychic is afraid of – events that go beyond expectations. That's why a trader needs to become an emotionally mature person with a stable psyche.

Often such qualities are acquired by a person during the frequent occurrence of unpredictable situations, in which an immediate and unique decision is required.

But, as we know, in business, every mistake brings a loss, which means – that in forex or other financial instrument is not a place for experiments. In addition, today there are many trainings and practical aids, allowing you to significantly improve your own emotional control.

 

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