You have the best trading strategy but still lose money. What’s the problem?
You keep wondering over and over again. Most Probably, it’s your Psychological trading mistakes.
Then it’s time to analyze this trade mistakes to create awareness and solutions to help you or even a friend.
Psychological trading mistakes
Have you ever wondered why you keep doing the wrong thing over and over again without understanding the reason? This is one clear sign of psychological trading mistakes.
The financial market has tendencies depicted by reactions to market events and the environment in specific ways.
Similarly, traders have repetitive attitudes and biases that affect their trading performance and leads them towards trade mistakes.
Fear and Greediness
On the one hand, fear can manifest itself in several ways in psychological trading mistakes.
First, trading mistakes as a result of fear can make you oversize your position or overbuy.
Second one is FOMO concept, FOMO meaning is “The fear of missing out” on an opportunity to make money will influence you to participate in many and including lousy trades.
Thirdly, fear of missing out will make you stop being cautious in your businesses. For instance, on a good day, fear of losing out on maximizing profit will prevent you from taking a good advantage.
On the other hand, greediness makes you hold on to a winning trade for long, hoping to get more profits. In a volatile market, your greediness could quickly turn against you locking you out of a winning trade.
Overconfidence
Overconfidence kicks in when you start to overestimate your ability to make profits in forex trading. This attitude leads to trading mistakes in any financial market.
Being overly confident will make you lose a lot of money and faster than the other psychological trading mistakes.
The level of your confidence greatly influences forex trading market investment or how much to risk. Overcome this problem by having a proper mindset and sticking to your plans and strategies.
Emotional trading
Getting very emotional in trade means that you will lose focus and objectivity.
You stop reasoning logically and clearly but follow your heart to many forex mistakes.
Consequently, emotional trading always blossoms into many psychological trading mistakes. Getting into forex trade with emotions will never help you.
This problem may develop and lead to another severe problem in forex trade mistakes.
Revenge trading
Revenge trading is the reaction to a lost trade in a desperate attempt to recover your money. Losing a trade at times make you angry and want to hit back on the market.
More often, the angry trader enters into a losing spree as he desperately tries to recover lost trade.
Accept the situation and wait for another day.
The practical solution here is to trade with a smaller amount of money while sticking to your plans and strategies.
Never trade while you are highly charged with fear, anger, greed, anxiety, or doubt.
Remember that losses in trade are inevitable, but don’t lose your focus toward making profits in the long run.
Revenge trading is horrible because you may lose your entire capital within a short time, especially if you start trading without stop loss.
The forex market out there doesn’t care about you and your revenge missions nor your forex mistakes.
Gamblers fallacy
Now the question raise, What is gamblers fallacy?
This is one of the psychological trading mistakes associated with gamblers and may easily affect you if you start treating forex trading as a gambling activity.
It refers to a common misconception that an outcome is affected by a series of events.
For example, if you lose five times in a row, it doesn’t necessarily mean the 6th trade is going to be a win for you because you just feel that your losing spree has ended.
After losing a trade, many traders tend to increase the size of the position, thinking that they are going to win this time around.
However, in the real sense, you are increasing your volume of the risk in a trade with the same probability of the outcome.
The solution to gamblers’ fallacy is straightforward. Understand and be aware of this problem so that it does not affect you.
Each trade is independent of the other. If you lose in a series of losses, it doesn’t necessarily mean this time around you will make it.
Anticipation
Very common with new beginners who may even start calculating profits mentally before entering a trade.
Things are different in the financial market, and losses against your high expectations are inevitable.
Anticipation is when you expect something to happen in the future, for example, thinking that tomorrow you will strike big and make millions in a trade.
This creates a feeling of excitement, anxiety, and anticipation. Anticipation makes you a dreamer of making millions.
Overcautious
Being highly cautious translates into very little or no profits at all. For instance, put stop loss very close.
Underestimation
Many beginners enter forex trading with a notion of making a lot of money. However, never underestimate the trading process because it can quickly go against your expectations.
The way forward
Having learned about the psychological trading mistakes, how to avoid forex mistakes should be the next step:
√ Be focused and objective in your Plans.
√ Avoid opinions of others and stick to your plans
√ Eliminate fear and greed by learning and understanding how a market operates.
√ Have a good trading plan and stick to it
√ Use a psychology trade journal to monitor and manage trading mistakes.
√ Check excitement and happiness. This can make you lose more money, especially after striking a win in a trade. The excitement will make you think you are on a winning lane. You will probably lose more by trading when very excited.
√ Most often than not, trading without stop loss makes you vulnerable to psychological trading mistakes.
Being aware of the trade mistake and willingness to change will help you both psychologically and improve on your finances.
Conclusion
The psychological trading mistakes could cause you lots of losses. Enter forex trade with a proper mindset by putting your emotions and psychology under control.