Trading psychology tips for beginners
If you’re a new trader trying to make sense of forex market movements and making money while you’re at it, the whole experience can be exciting and overwhelming at the same time. This is why it is important to work on your trading psychology from the very start of your trading endeavor.
Perhaps one of the most important things to remember when you’re starting out is to just take it easy. It can be tempting to try all technical indicators all at once or trade every single top-tier news release out there, but you might run the risk of overdoing it and feeling burned out later on. Stick with what you’re comfortable with and just add what you learn along the way.
Strategy from the point of view of personality
Another thing to keep in mind is to know yourself. Make sure you come up with a trading strategy that is in tune with your personality and your risk preferences. For instance, if you thrive in fast-paced movements and if you’re comfortable with managing many open positions at once, then you could look into scalp trading techniques. On the other hand, if you get easily stressed with quick price movements and would rather just check your charts every now and then, swing trading might be better for you.
Lifestyle considerations must also be taken into account when coming up with a trading strategy so as to not set yourself up for stress or failure. If you are planning on trading part-time while holding on to your day job, then you could look into trading techniques that won’t require you to be in front of your trading platform all the time.
Easier said than done is the trading psychology recommendation to stay on top of your emotions. After all, we are human and we can’t help but sometimes give in to poor decision-making when our minds are clouded with fear or greed. The trick in forex trading is to keep an objective mindset to be able to focus on what the market is telling you instead of letting emotions cloud your judgment.
This particular skill takes time to master and even experienced traders can still be guilty of being too emotional, which is why it is also important to constantly remind yourself to isolate these emotions when trading.
Discipline, discipline and discipline again
Staying disciplined goes hand in hand with trading psychology, as this enables you to stick to your strategy and risk management rules. After all, it can be tempting to deviate from your plan when the markets are going haywire but with the right mindset and discipline, you should be able to focus on the right action steps to take.
Lastly, it is important to note that keeping a trade journal is one of the best ways to work on your trading psychology, and this is a habit that must be started by beginner traders from the very start. This allows you to keep track of your profit and loss, trading decisions, trade strategies, and even the factors that influenced your decisions. In analyzing these, you can be able to identify your strengths and build on them while working on your weaknesses.
If you don’t want to keep a journal, do a monthly analysis of your trades for the entire month. Divide a sheet of paper or sheet into several tables. Write some thoughts on your trade at the top, such as:
You have to complete the tables in the way you trade, guarantees that each table will be slightly different depending on the trader, because everyone can struggle with different problems on the market. I would definitely add one table with the headline: “bad entries” which simply indicates a wrong market assessment.
From what we can see above, it can be concluded that the trader had a total of 13 good entries, but only 6 allowed him to earn in accordance with the strategy and he closed 7 transactions too quickly, probably due to fear (emotions prevailed), and too fast and too late entries indicate a desire overtaking and sometimes catching up with the market, and most importantly, this analysis shows that the stop losses are too tight so that the transaction could be successful, but the fear of too much loss led to the closing of the position.