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Trading Psychology

Forex trading psychology: Mind over matter

‘There is no free lunch’ is the only monetary axiom that bears truthfully to all conditions. Sadly, this truth is taken lightly by many who choose to indulge in the seeming purple patch of forex trading. The basic precept is that one has to have a pot of money to take a few risks. Even a diehard forex trader needs to have alternate money source to hedge in for losses. And the ready excuse for the rest of the lot is the same: they lost because they didn’t have enough to invest.

Forex trading, or the trading of foreign currency in pairs, is an inconstant art, and there it catches on the psyche. No matter how long one researches the ongoing trends, when it is a question of putting hard earned money into speculative purposes, different people have different mindset.

Funnily, the general awareness of a particular trend goes on almost globally, ready example being the dominance of dollars over other currencies in the last decade. But yet, once any currency in a comparable degree declines, the concerned investor starts having second thoughts and wages oppositely, just to find that the recurring trend recurred yet again.
The point is that patience is a virtue and has to be put in practice for all that is worth.

The investors, who are known to be grand forex winners, have all had one thing in common: Patience. It is just like fixed deposits. Everyone knows the variables, compound interest, time, rate, and amount and yet once having put in the money, the question of having the liquid asset locked for a said period irks the impatient investor.

Same is the case with forex trading. There are certain assumptions that will always prevail barring odd circumstances (like Recession). The good traders know how to capitalize on that and steadily stash the manipulated money. There might be periodic hiccups but they are taken as punctuations in the calculation by the intelligent trader. Unfortunately, these very traders are a thin minority.

The rest and the towering rest are skeptical of day to day events and put their money in many baskets. The fluctuating trends get over their minds and the feeling of not being in control leads him to make a mess. As a result, the same path that made the prior investor merry, confuses the latter. There are calculations galore and they tend to overlap each other. And money is a victim every time.

It is very abstract to study in retrospect the manner in which the impatient trader happens to be on the right path quite a lot, and yet the minor malfunctions caused by events as shocking as Tsunami or a WTC shakes the confidence of the trader hugely. The finance lessens in volume and the trader decides to make hasty arrangements. This psychology is so natural and involuntary that this has almost no cure.

Gambling is the opposite of death. The latter we have confidence in, the former eludes us, even though the probability of the former is quite high than the latter on a day-to-say basis.
It is all in the mind.

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