Psychology of forex trading
Forex trading for beginners involves an understanding of the psychology of forex trading. When I began learning about forex trading, I wasn’t interested in the psychology, I just wanted to know how to do it. Later I learnt that it is important to understand the psychology because most of us are motivated by greed and fear. Greed motivates us when things are going well. We want more. Fear motivates us when things are not going well. Chasing losses. The forex market is manipulated by big banks. It moves in ways that cannot be understood. For example, when the Reserve Bank of Australia first raised the cash rate, the price jumped high. This also happened the second time. When it happened the third time, the price fell. I don’t know why. So I have learnt that the price will suddenly rise or fall for no apparent reason.
When profits are being made, greed can step in and cause us to think that we have cracked the code and we keep putting on more trades, expecting more profits. Suddenly the price will move against us and we start losing. Then fear kicks in and we keep trading with the expectation that the price will change again, but it doesn’t. This has happened to me a few times. I thought I knew when the price would turn around, but I was wrong. Eventually it did turn around. The psychology of forex trading teaches us when to stop trading and wait for a better situation to develop. I was told that if a professional trader makes 20% in a year increase, then s/he is doing well. A small profit is better than a big loss.
Many different strategies
There are thousands of strategies for trading forex. Thousands of software programs claiming to be the one you need for success. Some of them work sometimes. None of them work all the time. When I began trading forex, I decided to find a method that worked all the time. Someone said you shouldn’t do this. Instead you should just find a method that works sometimes and wait for those times. I experimented with other people’s strategies and my own. Sometimes things went well, and sometimes they didn’t. I bought expensive robots (software). Nothing worked all the time. Through trial and error, I have developed a method that works most of the time. But I know that it won’t work if the price moves beyond a certain point. It works whether the price rises or falls. Find it here.
Indicators, Robots, Expert Advisors (EAs)
There are thousands of these. All software written to enable profits to be made. As previously stated, some of them work some of the time. I invested in an indicator that was supposed to be able to identify a change in trend. By the time it made the indication, the trend changed. A waste of money. The only indicator I use now is volume. This tells me when the big banks are trading. I use a couple of EAs that I had developed myself. Under my current trading method, I set up a virtual trading environment, so the EA will work 24/7/5. Then from time to time, I check things to see if I need to make any adjustments. Also to see how much money I have made. My current trading method won’t work all the time. If the price moves too far, then it won’t work. I have been trading for 9 years and in those years, I haven’t seen the price move beyond my trading limit. But I know that it might.
Conclusion
Forex trading for beginners is exciting. There is a high anticipation of making some big money quickly. The forex market is huge. Beware of glossy advertising from sellers of software “guaranteed to make you money.” I have fallen for some of these and they either don’t work, or don’t work all the time. A slow and steady profit is much better than some quick profits and a big loss.
Only trade with money you can afford to lose.
Like me you might think that you have finally found the winning method. Only to be wiped out by a sudden adverse market move.
Forex trading is risky and most traders lose money.
So try my method if you like, or develop your own, and good luck fellow trader!