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General Forex

Swing Trading – Trading Psychology

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Trading Psychology is something many swing traders and traders avoid, but really shouldn’t.  The fact that many traders neglect or avoid this is the main reason they suffer or perform poorly in their swing trading or trading regardless of the market.  If you truly wish to put yourself on the path to success then it is something that must be addressed.

The term psychology here refers to managing yourself while trading.  That’s right, yourself and not your trades.  This may sound a little strange, but trading induces a wide variety of emotions and reactions in people, especially when they begin to suffer a loss or start making a profit on a trade.  Many people lose control when it comes to trading and the thought of how much money they might possibly earn clouds their judgment.

Part of trading successfully is ensuring that you follow your trading plan and stick to the rules.  Beyond this, many traders, once they have several successful and highly profitable trades under their belt, begin to assume that they can outsmart the market.  As soon as this happens they are more often than not dealt a severe blow and suffer huge losses.  The market has basically taught them a lesson.  You are NEVER smarter than the market.

Swing trading and trading in general involves a wide variety of emotions.  If you are not aware of how these emotions can affect you, you may find that you execute your trades perfectly but always seem to close them out based on emotions and not market conditions.  To trade successfully, one must fully under the psychology of trading.

General Forex

Learn More About Trading Psychology and Improve Your Trading

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When it comes to trading, one of the most neglected subjects are those dealing with trading psychology. Most traders spend days, months and even years trying to find the right system. But having a system is just part of the game. It is very important to have a system that perfectly suits the trader, but it is as important as having a money management plan, or to understand all psychology barriers that may affect the trader decisions and other issues.

1. Act on Your Own Judgment

It was established earlier that if you do not enter a trade or investment with total confidence, you are likely to be spooked out at the first sign of trouble. It is much better to consider all the arguments, both bullish and bearish, prior to making a commitment.  In this way, you will be in a good position to judge whether the latest price setback is a result of a fundamental change in the overall Situation or if it is merely part of the normal ebb and flow that any market goes through.

Brokers, friends, and others that you respect can be helpful in providing you with ideas but you are the one who should make the final decision. After all, if things go wrong, it’s you who lose the money, not your friends.

2. Never Trade or Invest Based on Hope

Whenever you can identify hope as the primary justification for holding a position, close it out immediately. This action will achieve two things. First, it will protect you from a potentially serious loss. If your exposure is being rationalized on hope alone, you will be ignorant of any lurking dangers and will be that much more vulnerable to further price declines. Second, it is vital for you to regain some objectivity and free yourself from as many biases as possible. This can be achieved only by selling your position and making an attempt at a balanced assessment of your situation.

3. Don`t Overtrade

Sometimes you will start to lose money on trading just because you stay in the market for too long. Don’t overtrade, set daily goals for profit, limit for loss and don’t trade past them. Overtrading is one of the major psychological barriers in Forex trading.

4. Don’t Try to Call Every Market Turn

In our natural desire to be market perfectionists, it is quite understandable that we should feel the need to call every market turn. Unfortunately, that task is quite unobtainable. If we find ourselves trying to guess every twist and turn in the price action, not only will it lead to frustration, but we will totally lose any sense of perspective.

5. After a Successful and Profitable Campaign, Take a Trading Vacation

No person, however talented, can maintain a super trading performance forever. People operate in cycles in virtually every endeavor. Take baseball players, even the best have their off days, off weeks, and even off seasons. The same is true for traders. Therefore, make sure that you take a break after a successful campaign, returning to the markets six or eight weeks later. Your outlook is likely to be less overconfident, and you will also be able to take a more objective view of the markets.