Forex trading needs a certain mindset or a certain psychological environment to progress in the right direction. This is a very important aspect of indulging in forex because even the best of forex traders who have mastered the best of skills cannot succeed unless they learn to discipline their mind before and during trading.
This post will discuss how to develop a profitable trading mindset and use it to your forex trading advantage:
We all have dreams but exchanging dreams for reality is not going to benefit in any way. Be practical and stay grounded with your forex trading expectations. You cannot expect to churn out millions in profit from a tiny forex trading account within a short span of time. Always ensure that your expectations are well matched to reality and facts.
Never Go Overboard With Risks
Risks are risky and it never is a good idea to go overboard with them. For starters, use only that money which you can comfortably afford to lose as your investment capital to begin forex trading. Using your lifetime savings or your child’s college fund and such extremely dear money can never bring your profits and you are simply inviting desperation and doom into your life by doing so.
Don’t Compromise Peace of Mind
Forex trading is just a means of earning an income and it should be treated just like that. Life is not simply about earning money; there are scores of other things that are equally or more important than money. Make sure that your forex trading does not hamper your normal life in any way and you are not spending time worrying about your money even when not trading.
If you catch yourself doing this then you probably are not heeding advice #2, which is to avoid trading with high risk money that you can never afford to lose.
Do Not Compare Notes
Many traders have the tendency to keep sulking over past losses or gloat over past glories. This is not going to help you develop the right mindset for your forex trading, so quit doing this. Every trade is an independent event and depends upon a number of factors prevalent in the market at that point of time. So it makes no sense to keep reminiscing over the past trades, because you cannot expect the same set of market conditions to simultaneously repeat again.
Set Long Term Goals
Since forex trading is a source of income for you, you must consider it from the long term perspective. You are mentally prepared to attend office every day of the working week in order to receive a salary at the end of the work week or end of the month.
Similarly you have to understand that the benefits by way of profits in winning trades that you are aiming at may come in only once a month or maybe once in 2 weeks. That is perfectly okay and you shouldn’t sweat over the occasional losses that are bound to happen on other days. Just set a long term realistic target and avoid losing sleep over the journey and focus instead on the destination.
Have a Plan
Having a plan will benefit you a lot and you must spend both time and effort in creating one. First of all have a working forex trading strategy that you can master and apply skillfully. Secondly, maintain a journal of all the trades. This journal keeping habit will help you develop a disciplined approach.
Thirdly and most importantly do not simply shoot into the dark. Forex trading is not a game of chance where you can win on the merit of chance by simply trying again and again.
Avoid Costly Mistakes
We all make mistakes and mistakes are always costly for the reason that they always cause some loss or the other. But there are certain mistakes which can turn out to be more costly than the rest. Mistakes that you make in forex trading can undoubtedly turn out to be very expensive and this is not something that you would really want.
First of all try and make sure that you totally understand what you are doing and are fully aware of the implications of each of your moves and decisions while engaging in forex trading. Do not ever leave things to chance and gamble away your hard earned money in the process. Always double check that you indeed have a good reason to enter or exit your trade/s and you are not trading based on some impulse or hindsight trading.