The forex market, like none of the financial markets, is subject to the influence of moods, therefore, when trading on forex, psychological aspects occupy a special place.
The psychology of the forex market can be divided into two main sections – the psychology of the individual player and the psychology of the crowd.
The psychology of the forex market is simply necessary for successful trading, you can carefully study all the technical analysis and use a lot of automatic trading systems, but the biggest money is still earned by those who have studied the behavior of traders well in a given situation.
The main psychological aspect, due to which losses occur, is greed, this feeling is inherent in every person. Usually the situation is as follows, you enter the market and open a position on the move, the market goes in the right direction and you are already in profit.
You could close the position and exit with a profit, but you expect the profit to increase. But now the situation has changed and the trend has gone against you, it seems that you need to leave, but it seems a little more and the situation will change, the trend will turn in the right direction. Usually such expectations end with a complete loss of the deposit.
This is a clear example of greed in the psychology of forex trading. There is one way to correct the situation – before starting trading, plan profits and place stops, and in order not to be tempted to touch orders, tie your hands.
A cruel joke is also played by a large leverage, usually beginners in the forex market are very greedy, because the temptation to take the maximum is quite great, that is, to use the maximum leverage.
But at the same time, do not forget that the larger the leverage, the higher the risk, the faster you will lose your money, and this can happen for reasons beyond your control, the order did not work on time, the lights went out, etc.
The absence of fear is usually characteristic of new players, their psychology of playing in the market usually looks like this – the trend is going in the right direction, I will quickly open a position, intercept a couple of bucks and run away, usually this practice ends with the loss of the deposit. You should not be afraid, but should be protected by setting a stop loss.
Laziness– the main reason for all losses, because for successful Forex trading, you should first study its work, then analyze the situation, plan possible profits and losses. And only then to enter the market. All this takes time and some effort, but otherwise you are unlikely to become a successful trader.
To really imagine how the psychology of the forex market works, you should turn to practical examples.
Psychology of the forex market practical points.
1. Waiting usually before the release of news there is a decrease in trading volumes, the trend slows down its movement. Buyers are afraid to buy, expecting a fall in the rate, and sellers are afraid to sell, hoping for an increase.
2. Panic is perhaps the most dangerous psychological moment and the most important thing is not to succumb to it; when panic occurs, it is advisable to simply leave the market and sit out. Usually the situation looks like this – a new recalculation of the US credit rating has been announced, according to forecasts, the news will be negative, the dollar is starting to go down.
Most traders try to get rid of this currency, which further increases the panic and pushes the trend down.
But then the news comes out, the rating has not changed and the trend is reversing, as a result, those who did not fuss won. Remember the main rule of working on the stock exchange – if a collapse occurs, then you will never know about it in advance.
3. Hurry – just as often leads to rash actions, as soon as a positive trend has been noted in the market, many traders tend to make a purchase, and this can in turn lead to a reversal. Therefore, do not write off, let the trend gain strength and only after receiving confirmation signals, open a position.
The psychology of the forex market is a rather important aspect that cannot be written off when carrying out operations, remember – as you think, most traders think the same way, try to use this knowledge in your game.