New traders may not realize it right away but trading psychology actually plays a very important role in your trading results. You tried reading a lot of trading books and practicing trading through demo accounts in MetaTrader 4 (MT4). However, something seems wrong and you still keep on losing money in the live market. Most of the time, the culprit to this isn’t the lack of knowledge but the trading psychology of the trader.
The Importance of Trading Psychology
Trading is all about finding the best trading strategy and strictly implementing them all over again. These strategies are placed into a trading plan, setting firm guidelines on the perfect time to trade and what to trade. It also includes risk management and how you should enter or exit the positions. When you have a trading plan, you may need to change it from time to time as you gain additional experience.
Overexposure
Overly-exposed traders tend to desensitize several types of information. Most of the time, new traders get as much information as they can when starting out. They get general facts all over again. Things like making a trading plan, how to stick to it, the right risk-reward ratio, the proper position size, and others are all overwhelming information but necessary for every trader. These are all sources of good advice but as traders glance over it repeatedly, they may think that they don’t need it anymore because they already know the basic idea.
You must never mistake knowing from being able to do the things that you are about to do. If you are still not sure what to do, take a look back and know the things that you have taken for granted. These things are the things that you refuse to accept that you have trouble with. No matter the years of experience that you have, always check back on the basics.
Avoiding Losses
Humans have this common emotion in which they always tend to avoid losses. But you need to accept the fact that losing is already part of trading. There are two versions of loss aversion – people who are trying to hold on despite knowing that it is a losing trade and traders who tend to ‘freeze’ when it is the perfect time to pull the trigger and start a trade. The trader who keeps on holding into a losing trade refuses to accept the fact that they are facing losses.
The Lottery Syndrome
Many people who have the lottery syndrome tend to long for a windfall. But trading is nothing similar to lottery tickets. To pocket huge profits, you have to make a huge bet and wish that the market goes against your speculations. Picking the right asset isn’t all that matters. You also need to pick the right time to enter a position. Fast execution is highly needed as well as foresight to the happenings in the future is essential to becoming a profitable trader.
Employing risk management will further protect your loans. Make sure to use the right trading platform like MetaTrader 4 (MT4) when trading Forex because it has a comprehensive number of tools that you can use for trading.
