Forex Trading Psychology: Learn to See the Line Between the Trading Plan and Your Emotional Impulses
The vast majority of Forex education organizations fail to address the only true characteristic of a market place, the human nature.
You can easily find loads of charts, pivot points, moving averages, trend lines and all sorts of Fibonacci ratios, together with the latest in trading automation. Any Forex website publishes some or all of these data, along with myriads of other details, interviews and opinions.
You may even get entry and exit signals, support and resistance levels, all of which could appear as sufficient in the decision making process.
I was under the same impression as a beginner, I was at the same level as an intermediate trader and only heavy losses and low risk/reward decisions made me look for a different approach to trading.
If you are aware of the importance of having a trading plan for each trade you plan to initiate, then you must be familiar with moments of doubt, when following the opening of the trade, the market goes awry, together with your emotions and self-esteem.
Do you feel frustrated? Join the vast club of frustrated professional Forex traders.
When you see the market moving against all odds and logic, your emotional self cries for an immediate position reversal (SHORT from LONG and vice-versa), in a complete disregard of your own trading plan.
On the other hand, all your training books, videos and mentors have pumped the "trading plan supremacy" into your brain.
While the viable solution seems to reside in the robotic way of trading the plan, a professional operator must learn to listen to his or her "hidden partner", the subconscious.
Our brain is capable of storing immense quantities of data, without us being aware of it. Our five senses perceptions are in constant use and they permanently add to our overall life experience. While our subconscious is capable of dealing with all this seamlessly, the conscious mind has only a very limited operational capacity, primarily used to help us dealing with our daily tasks.
As we trade, ALL our experiences are deposited deep within our brain, slowly building up what I call the unseen analyst. This is what you may call the sixth sense or the instinct traders develop as they progress.
As the name of the game with Forex trading is VOLATILITY and 80% of all trades do not last more than 2-3 days, with the vast majority of them being daytrades, it is easy to accept that conditions can and will change in a heartbeat, rendering most trade plans obsolete.
The only way to alleviate the contradictions between your emotional self and the heavily trained brain is to learn how to give them priority over time.
As a beginner, you simply cannot have the emotional experience to "feel" anything related to the market processes and therefore it is advisable to rely completely on the mechanisms of a trading plan.
At this stage, take your time to learn how to interpret the charts, prepare yourself according to the daily economic calendar and how to construct a comprehensive trading plan. Once you took a trading decision, stick with it, no matter what. At this stage, you are a robot, implementing a trading strategy.
Your emotional weight should be nonexistent in the economy of the trade.
As you progress along the path of becoming a professional Forex operator, your unseen analyst will start adjusting your trading decisions, silently participating in your trading decision process.
It is now the time to make room to your "feel", to accommodate your growing sentiment of "feeling the market".
Your emotional weight should now become an accepted presence.
You will soon learn how to adjust this "mix" in a way to achieve the optimal trading performance.
by Bogdan Vasile