Psychology Of Trading

The psychological aspect of trading is usually underestimated by those new to trading. The psychological problem for most traders is the fear of losing - ironically it is this fear that causes most traders to lose money in the long run. The fear of losing can manifest itself in a number of ways:

Unable to pull the trigger and enter a trade. A trader can start to lose faith in a system that has produced a number of consecutive losing trades and might start to look for further confirmation before taking the next trade. Inevitably the trade that is not taken will be the winner. The point of a mechanical trading system is that it forces the trader to take the trades that they wouldn't normally take just by looking at a chart.

Unwilling to accept a losing trade and cut a losing position short. Losing trades are an inevitable part of trading, many successful systems will produce more than 50% losing trades. The key is to never marry a position - if it hits your stop loss then exit it. Preserve your capital for the next trade.

Taking a profit too early to prevent a winning position become a losing one.

There are a number of ways to counteract the fear of losing:

Have a plan. Never enter a trade on a hunch, tip or gut feeling. Always know your exit before you enter a trade.

Discipline. Developing your own trading plan that you believe in will make it much easier to follow than trying to trade someone else's.

Money Management. If a position is too large for your account size then you are more likely to hang on to the losers or cut the winners short. Each trade is merely one step along a very long journey. Strict money management rules should ensure that you never stake more than you are comfortable with.

Ignore the money. Don't view your trading account as money, view it as points. The better your trading plan and your execution the more points you will accumulate as a reward. It is difficult to trade objectively if all you can think of is that your last losing trade could have paid for a two week holiday or bought you the latest camcorder!

Tim Wreford runs Online Futures Trading, a website that provides information and resources for traders. Tim also provides a free day trading system, the results of which are updated daily on the site.

Where is the Market Going?

If you ask me whether the market will have moved... Read More

Trade Entry Techniques

Most traders tend to concentrate on pinpointing the perfect entry... Read More

Ways to Acquire Discipline in Trading

One way to acquire discipline in trading..."Hey Joe! When you... Read More

Forex Signal Services

What are Forex signals? Forex signals are paid services offered... Read More

Financial Crises, Global Capital Flows and the International Financial Architecture

The recent upheavals in the world financial markets were quelled... Read More

How Currencies are Traded in the FOREX Market

Currencies are traded in dollar amounts called "lots". At 100:1... Read More

Forex Trading Systems

The foreign exchange currency market is the largest market in... Read More

Business and the Forex

The business world is a complex web of supply and... Read More

Forex Currency Trading

It is possible to buy and sell money from different... Read More

What I Learnt Losing £60,000 My First Year as a Full-time Trader

During my first year as a local (independent trader) on... Read More

Forex2u Forex Strategy On Successful Forex Trading

The essence of the FX2u Forex strategy is that it... Read More

Forex Trading - Advantages and Disadvantages

What is Forex Trading?Forex, or Foreign Exchange, is the simultaneous... Read More

The Secret of Reduced Margin Spreads

One of the best kept secrets in trading is that... Read More

Forex Trading Can Be Like Day-trading

Forex trading, or foreign currency trading, has become a bit... Read More

Crisis of Confidence in the EU

The European Union (EU) constitution was dealt a double blow,... Read More

Money Management, Part 1

There are some common mistakes I've seen traders make in... Read More

Online Forex

Q1: When you consider that the foreign exchange market has... Read More

Forex Broker Involvement Optional

To trade on the forex market, the largest financial market... Read More

Forex Brokers - Helping to Maximize Your Success

A Forex broker is a broker dealing in foreign exchange,... Read More

Psychology Of Trading

The psychological aspect of trading is usually underestimated by those... Read More

E-currency Exchange Trading

If you are reading this article you are probably one... Read More

Why Forex Traders Plan To Fail Before They Even Place Their First Trade & How You Can Know It & ...

Have you heard the wise saying that a trader who... Read More

Day Trading the Index Futures - How to Judge Good Entries

QUESTION: If the SP futures fall through support and go... Read More

Sending Signals for Trading in Forex

Forex signals are sent by a forex firm to their... Read More

Forex Signal, Forex Signals Advice

There are lot's of Forex signals providers out there. New... Read More