Psychological Elements of a Successful Trader

Courage Under Stressful Conditions When the Outcome is Uncertain

All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. The simple task of hitting the buy or sell key is extremely difficult to do when your own real moneyis put at risk.

You will feel anxiety, even fear. Do you have the courage to be afraid and act anyway? Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.

However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction canbecome an issue – you’re overconfident and not focused enough on the risk you’re taking.

Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.

Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, often times under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers.

Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.

The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit.  So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. Studying your chart and determining an objective exit point is reality based and rational.

If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two. If putting your money at risk makes you a nervous wreck it’s because you lack the knowledge base to be confident in your decision making.

Patience to Gain Knowledge through Study and Focus

Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1.

To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.

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