Psychology of Forex trading.

In Forex, as in any financial market, psychological factors play a huge role. They sometimes interfere with making the right decisions and are almost always the primary cause of losses.

Surprisingly, psychological market pressure has been the cause of most of the largest losses that have occurred throughout the history of the currency exchange. In this article, I will outline the key points that will help you avoid making unfortunate mistakes.

Forex psychology primarily concerns the timing of opening new trades or closing existing orders. So, what should you do to ease market pressure?

Psychology of entry.

1. A deceptive trend – you logged into Forex and saw an uptrend , and your hand instinctively reached for a buy order. This is the number one mistake of any novice trader. It usually results in an erroneous trade direction.

Never open trades in a hurry; immediately after launching your trading terminal , first assess the situation on adjacent timeframes and conduct at least a brief market analysis.

2. Periods of rapid movement – ​​very often, trends move at a mind-boggling speed. A rapid change in the exchange rate occurs literally within the formation of a single candle. Such moments are also undesirable for entry. You think that by opening a trade, you'll have earned several pips .

But more often than not, the situation unfolds in one of two ways: you receive a requote, or the price begins to move just as rapidly against your trade.

3. Hype – news about the weakening dollar comes out, and everyone immediately rushes to buy euros. Don't follow everyone else; if you weren't one of the first to hear the news, you'll likely buy at the start of a strong pullback. Try to act on your own, not on the crowd's impulse—this is one of the fundamental rules of forex psychology.

Psychological aspects of closing Forex trades.

Here, the situation is even worse than in the previous case.

1. Panic – news comes out or a rumor spreads about an impending dollar collapse, and you have a buy trade open. Don't hesitate to close it if it can withstand fluctuations of more than 500 pips; most likely, the rumor is false, as you will only know about a real dollar collapse when the quotes reach their minimum.

2. Fear – this is precisely what prevents you from maximizing your profit in Forex trading. You opened a successful trade and then hesitate to close it with only 10 pips of profit, fearing to lose them. But the essence of trading is precisely achieving the maximum possible profit.

3. Hope – surprisingly, it can also cause irreparable damage to your deposit. A trader hopes to the last that the trend will change its direction and turn in the right direction. Never wait for a reversal if the price has already crossed significant levels and is confidently moving against you.

4. Greed – it also makes people hold positions until they lose everything, but it also influences the choice of disproportionately large trade sizes. Greedy traders tend to lose their deposits very quickly.

Forex psychology has a significant impact on trading performance. Try to at least partially eliminate this factor by placing stop-loss and take-profit orders and transferring some trades to pending orders .