In the previous article we discussed about the Importance of Trading Psychology in achieving success in the forex market, but there are still many traders who are still doubtful and confused about how to overcome the trading psychology problem, especially for those of you who are new to the forex market.
One way to overcome the problem of trading psychology is of course by attending training on forex trading. Training on forex trading is one of the important things you need to do to overcome the psychological problems that are often experienced by traders. By attending a proper trading training, you will also gain an important ability to make rational decisions, instead of relying on your feelings.
But if you prefer to trade without having sufficient reason to make an entry decision, you will eventually become more emotional, and can result in losses.
In essence, you need to understand how the forex market operates, and also the factors that influence its movements. For example, if an economic news is released, you will know how the news can affect price movements in the market, rather than being scared and disrupting the trading plan that has been made.
Training on proper forex trading will also help you in creating a strategy that can generate a consistent profit. What’s more, the trading strategy that you make can also make you more relaxed or calmer, especially because with that strategy you can already measure the risks that you might be able to suffer, and also reduce your worries of loss.
How to Train Trading Psychology
Follow the Trading Plan That Has Been Created
Trading by having a good trading plan can reduce risk, and help you control your emotions. Usually, this trading plan consists of a series of guidelines and strategies that you will undertake to make a transaction.
This trading plan is usually made after conducting in-depth analysis, and also has understood the behavior of price movements in the market, where this is certainly something that is needed by a trader to maintain consistency and profitability of trading.
There are no specific criteria in making a trading plan, but at least it must consist of the following criteria:
How many targets do you want to achieve in one position?
When will I open a position?
How much risk is in each position?
What strategies do I use in making entry decisions?
How will I manage open positions?
What strategies do I use in making close position decisions?
As we discussed earlier, emotions can destroy your control, especially if you let doubts of fear continue to haunt you. This usually happens when you trade without a good trading plan, which in the end will make you trade only based on feelings, and without an in-depth analysis. Conversely, a good trading plan will help you to stay focused, and trade profitably without being distracted by your feelings.
By having a good trading plan, whenever there are signs of a problem, you will not be triggered to make a transaction that is based on fear or greed, because all of the problem scenarios have been anticipated by a set of guidelines called a trading plan.
Use Risk Management
I am sure that you often hear an expression that states that “trading is gambling,” even though it cannot be fully justified. Actually, there is one thing that distinguishes between trading and gambling, namely a risk management. In other words, if you can manage trading risk, then it cannot be called gambling. But on the contrary if you bet all the funds you have in trading, then it is absolutely called gambling.
To prevent you from being an emotional type of trader or gambler, it would be better for you to limit the amount of loss. For example, one risk management that is mostly done by professional traders is to limit losses by 1% of the amount of capital you have for each transaction.
In addition to the above, a trader must also be able to use leverage wisely, master the fear that triggers it not to use Stop Loss, or determine Take Profit. It must be stressed again that trading emotionally is something that can increase your trading risk.
Change the Mindset
Often consciously or unconsciously ignored by traders, but did you know that unrealistic mindset is one of the main causes of a trader to be more emotional. If you are not calm, and are not focused on making every trading decision, then you will also easily be trapped in a number of conditions such as fear, greed, revenge, or euphoria which can certainly harm you.
In this case, you need to have a realistic mindset, and become an emotionally mature trader. It should be remembered again that only with the capital desire to get profits is not enough to help you achieve these benefits. But you also need to practice trading with discipline, and avoid trading decisions based on feelings of joy or other emotions.
Simply put, with a logical and clear mindset, then you can rid yourself of a sense of emotion that often makes trading decisions a trader becomes detrimental.