Avoiding Psychological Blunders that destroy your trading

Avoiding Psychological Blunders that destroy your trading

When it comes to Forex, the saying that 90% of the struggle to become a profitable trader takes place within a trader’s head has become hugely popular. But the question is, does this saying hold true, or is it just something that losers will say? Importantly, does this saying hint about whether the market is made up and randomized; and can’t be beaten by the perseverance of a trader alone? The answers, so far, are mixed.

Let’s not kid ourselves; there’s a lot of money to be made on Forex education. A cursory search on the internet will reveal hundreds of thousands of results, but they lean excessively towards opinions and very little importance is given to actual data. However, that doesn’t mean that the market is randomized and a careful analysis can’t come out on top.

The Randomness Illusion

The mere idea that the market is random, is frankly, ludicrous. Come to think of it, is there any such thing as randomness? There is a pattern even in chaos, which just goes on to show that randomness is but an illusion created by man. The same concepts apply to financial markets; the movements in price occur due to the demand for buying or selling the shares. Hence, it can be said that markets aren’t randomized, but if one was to look at the bigger picture on a larger time frame, they will be able to see a pattern emerge. As a result, it can be effectively said that thorough information is required to accurately make a prediction.

The good thing about carrying out a technical analysis is that it can give you an edge on the basis of statistics, though a small one. For instance, certain technical formations might show that the probability of the price reaching 20 pips in one direction is 53%.  Hence, the market can be beaten. For traders who realize that the same technical formations could also show a probability of 35% of the price reaching 80 pips, which is much more profitable. In the long run, it has to be said that virtually all speculative markets can be beaten.

Why do we fear the market?

Now that we know that it is actually quite possible to beat the market, the question that arises is this; why are so many traders still in fear of the markets? The simplistic answer to this is the lack of belief and trust in one’s own self. The average trader is still quite worried about beating the market, and doesn’t believe that he can do so. A number of psychological issues come to the fore, which effectively hinder his progress.

How to believe you can ‘BEAT’ the market

There are two ways that you can feel that the market can be beaten; factual and spiritual. Let’s talk about the factual manner first. Create a strategy based on a longer frame of time, but one that employs a shorter time frame. It would be a wise idea to hold your position until the trends for the longer time frame have changed; you should also trade instruments which show the most powerful trends. Then, use the strategy over a number of years. If you have created a reasonable strategy, you will get favorable results. Remember, loss always occurs at some points, but the overall impact will be more positive than negative.

Now that we are done with the factual challenge, let’s talk about the spiritual challenge. A lot of us believe that you can’t gain anything without losing anything, and as a result, we are willing to accept a loss to gain some.  However, that should not be the case. The first step that you need to take is to remove this feeling, and realize that it exists only within you. There are many people who have made decent amounts of money on Forex trading, and you can do so as well. Remove the barriers that exist within yourself, and you will be able to feel much better about yourself!

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