Forex Market Trading And The Mind Games

[abdulla1]

First, what is Forex: The FOREX or Foreign Exchange market is the largest financial market in the world, with an volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another.

 

Mind Games defined: Mind Games are a kind of social interaction where participants try to screw with one anothers' heads. The concept is most often used colloquially to refer to deceitful, confusing or Machiavellian situations. However some mind games are described by the psychology of transactional analysis.

 

When it comes to trading on the Forex market, winning is a matter of the mind rather than mind over matter. Any trader who's been in the game for any length of time will tell you that psychology has a lot to do with both your own performance on the trading floor and with the way that the market is moving. Playing a winning hand depends on knowing your own mind — and understanding the way that psychology moves the market.

 

Studying the psychology of the market is nothing new. It doesn't take a genius to understand that any arena that rides and falls on decisions made by people is going to be heavily influenced by the minds of people. Few people take into account all the various levels of mind games that motivate the market, though. If you keep your eye on the way that psychology influences others — including the mass psychology of the people that use the currency on a daily basis — but neglect to know what moves you, you're going to end up hurting your own position. The best Forex coaches will tell you that before you can really become a successful trader, you have to know yourself and the triggers that influence you. Knowing those will help you overcome them or use them. Are you saying 'Huh?" about now? Believe me, I understand. I felt the same way the first time that someone tried to explain how the mind games we play with ourselves influence the trades and decisions that we make. Let me break it down into more manageable pieces for you.

 

Anything involving winning or losing large sums of money becomes emotionally charged. All right. You've heard that playing the market is a mathematical game. Plug in the right numbers, make the right calculations and you'll come out ahead. So why is it that so many traders end up on the losing end of the market? After all, everyone has access to the same numbers, the same data, the same info — if it's math, there's only one right answer, right?

 

The answer lies in interpretation. The numbers don't lie, but your mind does. Your hopes and fears can make you see things that just aren't there. When you invest in a currency, you're investing more than just money — you make an emotional investment. Being 'right' becomes important. Being 'wrong' doesn't just cost you money when you let yourself be ruled by your emotions — it costs you pride. Why else would you let a loser ride in the hope that it will bounce back? It's that little thing inside your head that says, "I KNOW I'm right on this, dammit!"

 

To most people, being right is more important than making money. Here's the deal. The way to make real money in the forex market is to cut your losses short and let your winners ride. In order to do that, you have GOT to accept that some of your trades are going to lose, cut them loose and move on to another trade. You've got to accept that picking a loser is NOT an indication of your self-worth, it's not a reflection on who you are. It's simply a loss, and the best way to deal with it is to stop losing money by moving on — and really move on. Moving on means you don't keep a running total of how many losses you've had — that's the way to paralyze yourself. This brings us to the next point:

 

Losing traders see loss as failure. Winning traders see loss as learning. Not too long ago, my twelve year old son told me that before Thomas Edison invented a working light bulb, he invented 100 light bulbs that didn't work. But he didn't give up — because he knew that creating a source of light from electricity was possible. He believed in his overall theory — so when one design didn't work, he simply knew that he'd eliminated one possibility. Keep eliminating possibilities long enough, and you'll eventually find the possibility that works.

 

Winning traders see loss in the same way. They haven't failed — they've learned something new about the way that they and the market work. Winning traders can look at the big picture while playing in the small arena.

 

Suppose I told you that last year, I made 75 trades that lost money, and 25 that made money. In the eyes of most people, that would make me a pretty poor trader. I'm wrong 75% of the time. But what if I told you that my average loss was $1000, but my average profit on a winning trade was $10,000? That means that I lost $75,000 on trades — but I made $250,000, making my overall profit $175,000. It's a pretty clear numbers game — but how do you keep on trading when you're losing in trade after trade? Simple — just remember that one trade does not make or break a trader. Focus on the trade at hand, follow the triggers that you've set up — but define yourself by what really matters — the overall record.

 

Bottom line: You can't keep emotions out of the picture, but you can learn not to let them control your decisions. Keep it all in perspective and realise that there are a lot of big boys playing this game and playing it to win...

 

by David Mclauchlan

[budado]

Its give me an headache reading this thread and I notice that the author of this thread get banned. but one thing I want to say. Even though he get banned and even though I get a headache because of the long reading. Its still informative. Yeah. Many will say they have read this a hundred times in internet. But did you try to read and understand? Its like praying. You pray the same prayer every day that you forgot what the meaning of what your praying. In forex we also need to read and try to understand what we read. Not just read.

[undrais]

Great article. It is really full of useful information. I'm starting to learn more about Forex and this is a good start. Thanks for sharing this great article.

[heartboy23]

Thanks for sharing this, it is a really useful article.

[mesbakh]

some people tarde in forex like palying a game. i agrre but not 100 percent. because fundamentally forex is not a game

[shoaybkhan]

Although you are banned, i don't know why but it is an informatice article, thanks.

[Bagus]

when we do forex trading then do not think this is a game because forex is not a game that was just playing around and forex business is hard and we must have a good knowledge in this business

some people tarde in forex like palying a game. i agrre but not 100 percent. because fundamentally forex is not a game

[standart]

by reading what other traders take in trading, we will able to predict the market pressure for sure. however such technique require both knowledge about fundamental and technical analysis. read market expectations require long trading experience. as we know that traders tend to follow the market flow, and without reading such flow, make profit would become difficult.

[surya77]

forex trading may is use you mind to find know how to use best technique and strategy to get profit and more benefit in forex trading, so in other words is said you skill in mind and strategy in forex trading also tradined.

[myregister]

by reading what other traders take in trading, we will able to predict the market pressure for sure. however such technique require both knowledge about fundamental and technical analysis. read market expectations require long trading experience. as we know that traders tend to follow the market flow, and without reading such flow, make profit would become difficult.

Well, the trend is a friend of a trader, with the trend they could take profit. but I do not see the correlation with the mind game we talk here? I think risk management is one of the mind games that guided a trader in  to be consistent and not be affected by any temptation.