Psychology of forex trading pdf

Forex Trading Psychology Books.

Controlling one's emotions is vital for every Forex trader. Here you will find the free e-books about Forex trading psychology and emotion control in the financial trading. You will learn how to calm yourself and set the long-term goals in your trading. Recommended for all traders.

Almost all Forex e-books are in. pdf format. You'll need Adobe Acrobat Reader to open these e-books. Some of the e-books (those that are in parts) are zipped.

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If you are the copyright owner of any of these e-books and don't want me to share them, please, contact me and I will gladly remove them.

Stop Losses Are For Sissies — by W. R. Brooker & Co. — a rather descriptive evidence of how important stop losses in Forex trading are.

Your Personality and Successful Trading — by Windsor Advisory Services — describes and discusses almost all psychological and emotional aspects of financial trading.

Trading as a Business — a book about developing a psychological attitude toward the trading, creating a trading strategy and following it, while treating trading as a business, by unknown author.

The 7 Deadly Sins of Forex (and How to Avoid Them) — this book by Marc Low lists 7 most popular emotional and psychological pitfalls that wipe clean the accounts of even the talented Forex traders.

The 5 Steps to Becoming a Trader — a book by unknown author. It lists the 5 steps of the Forex trader's way to becoming successful.

Enough to Be Dangerous — by Brian McAboy. The book offers an alternative approach to solving psychological problem of trading. Serves as an introduction to the author's webinar.

Part 12: The Psychology of Forex Trading.

The Psychology of Forex Trading.

I have been a trader long enough to know a thing or two about how most people think while trading the market. You see, most people experience similar thinking patterns and emotions as they trade the markets, and we can learn many important things from the differences in the way losing traders think and the way winning traders think.

I would be lying to you if I said that success in the Forex markets depends entirely on the system or strategy you use, because it doesn’t, it actually depends mostly on your mindset and on how you think about and react to the markets. However, most Forex websites trying to sell some indicator or robot-based trading system won’t tell you this, because they want you to believe that you can make money in the markets simply by buying their trading product. I prefer to tell people the truth, and the truth is that having an effective and non-confusing trading strategy is very important, but it’s only one piece of the pie. The bigger portion of the pie is managing your trades correctly and managing your emotions correctly, if you do not do these two things you will never make money in the markets over the long-term.

• Why most traders lose money.

You have probably heard that most people who attempt Forex trading end up losing money. There’s a good reason for this, and the reason is primarily that most people think about trading in the wrong light. Most people come into the markets with unrealistic expectations, such as thinking they are going to quit their jobs after a month of trading or thinking they are going to turn $1,000 into $100,000 in a few months. These unrealistic expectations work to foster an account-destroying trading mindset in most traders because they feel too much pressure or “need” to make money in the markets. When you begin trading with this “need” or pressure to make money, you enviably end up trading emotionally, which is the fastest way to lose your money.

• What emotions should you watch for in yourself while trading?

To be a little bit more specific about “emotional” trading, let’s go over some of the most common emotional trading mistakes that traders make:

Greed – There’s an old saying that you may have heard regarding trading the markets, it goes something like this: “Bulls make money, bears make money, and pigs get slaughtered”. It basically means that if you are a greedy “pig” in the markets, you are almost certainly going to lose your money. Traders are greedy when they don’t take profits because they think a trade is going to go forever in their favor. Another thing that greedy traders do is add to a position simply because the market has moved in their favor, you can add to your trades if you do so for logical price action-based reasons, but doing so only because the market has moved in your favor a little bit, is usually an action born out of greed. Obviously, risking too much on a trade from the very start is a greedy thing to do too. The point here is that you need to be very careful of greed, because it can sneak up on you and quickly destroy your trading account.

Fear – Traders become fearful of entering the market usually when they are new to trading and have not yet mastered an effective trading strategy like price action trading (in which case they should not be trading real money yet anyways). Fear can also arise in a trader after they hit a series of losing trades or after suffering a loss larger than what they are emotionally capable of absorbing. To conquer fear of the market, you primarily have to make sure you are never risking more money than you are totally OK with losing on a trade. If you are totally OK with losing the amount of money you have at risk, there is nothing to fear. Fear can be a very limiting emotion to a trader because it can make them miss out on good trading opportunities.

Revenge – Traders experience a feeling of wanting “revenge” on the market when they suffer a losing trade that they were “sure” would work out. The key thing here is that there is no “sure” thing in trading…never. Also, if you have risked too much money on a trade (starting to see a theme here?), and you end up losing that money, there’s a good chance you are going to want to try and jump back in the market to make that money back….which usually just leads to another loss (and sometimes an even larger one) since you are just trading emotionally again.

Euphoria – While feeling euphoric is usually a good thing, it can actually do a lot of damage to a trader’s account after he or she hits a big winner or a large string of winners. Traders can become overly-confident after winning a few trades in the market, for this reason most traders experience their biggest losing period’s right after they hit a bunch of winners in the market. It is extremely tempting to jump right back in the market after a “perfect” trade setup or after you hit 5 winning trades in a row…there’s a fine line between keeping your feet grounded in reality and thinking that everything you do in the markets will turn to gold.

Many traders enter into a tailspin of emotional trading and losing money after they hit a string of winners. The reason this happens is because they feel confident and euphoric and forget about the real danger of the market and that ANY TRADE CAN LOSE. The key to remember here is that trading is a long-term game of probabilities, if you have a high-probability trading edge, you will eventually make money over the long-term assuming you follow your trading edge with discipline. But, even if your edge is 70% successful over time, you could still hit 30 losing trades in a row out of 100….so keep this fact in mind and always remember you never know WHICH trade will be a loser and WHICH will be a winner.

• How to obtain and maintain an effective trading mindset.

Obtaining and maintaining an effective Forex trading mindset is the result of doing a lot of things right, and it usually takes a conscious effort on the trader’s behalf to accomplish this. It’s not necessarily difficult to achieve, but if you want to develop an effective trading mindset, you have to accept certain facts about trading and then trade the market with these facts in mind…

You need to know what your trading strategy (trading edge) is and you need to master it. You have to become a “sniper” in the market instead of a “machine gunner”, this involves knowing your trading strategy inside and out and having absolutely NO questions about what the market needs to look like before you risk your hard-earned money in it.

You need to always manage your risk properly. If you do not control your risk on EVERY single trade, you open the door for emotional trading to take hold of your mind, and I can promise you that once you start down the slippery slope of emotional Forex trading, it CAN be very hard to stop your slide, or even recognize that you are trading emotionally in the first place. You can largely eliminate the possibility of becoming an overly-emotional trader by only risking an amount of money per trade that you are 100% OK with losing. You should EXPECT TO LOSE on any given trade, that way you are always aware of the very real possibility of it actually happening.

You need to not over-trade. Most traders trade way too much. You need to know what your trading edge is with 100% certainty and then ONLY trade when it’s present. Once you start trading just because you “feel like it” or because you “sort of” see your trading edge…you kick off a roller coaster of emotional trading that can be very hard to stop. Don’t start over trading and you will likely not become an emotional Forex trader.

You need to become an organized trader. If there is something that is the “glue” that holds all of the points I’ve discussed in this part together, it is being an organized trader. By organized, I mean having a trading plan and a trading journal and actually using both of them consistently. You need to think of Forex trading like a business instead of like a trip to the casino. Be calm and calculating in all your interactions with the market and you should have no problem keeping the emotional trading demons at bay.

Syllabus Of All Chapters.

About Nial Fuller.

1 Comment Leave a Comment.

Wow… this was very helpful for me.. I love the last part of the paragraph “think of trading as a business and not a trip to the casino” with this, I am most probably gonna start of on the right foot, thank you sir! #I’m Malcolm ZA.

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Trading Psychology.

Binary Options Trading Psychology. 3 Real Culprits of Trading Failure.

Any trader can master his trading skills, become an expert in chart interpretation or develop excellent understanding of financial markets, but trading success or failure is not only a matter of knowledge, education and skills. When strong emotions come into picture, all meticulous planning and polished trading techniques seem to fade from existence until there is nothing left but disappointment and financial loss. Sooner or later every trader realizes that binary trading psychology has a great effect on the profits or losses and such emotions as greed, panic, elation, excitement, lack of confidence can force him to break his own trading plans and make mistakes. Trading success or failure is a direct consequence of traders’ choices, and if technical errors can be easily corrected by changing a trading strategy, emotional pitfalls can cause a long lasting damage and their identification and correction can be quite a battle. A trader who masters the psychological aspect of trading is on a right way, and all the rest is just a matter of practicing and education, before the desired outcome is attained.

Trading Psychology: Fear.

One of the main culprits behind trading failure is fear of loss. This emotion is a part of natural defense mechanism in stressful situations. When it comes to trading, fear can manifest itself in many different shades such as fear to lose the money invested on a trading account, fear of missing out on potential profits, fear of failure, etc. Strong fear can cause several types of psychological response. Fear may have a “freezing” effect on a trader causing him to be too hesitant in his trading decisions and miss perfect trading opportunities. Aggravated fear can lead to irrational actions, when a trader gets so frustrated that unconsciously he starts doing everything to get out of this stressful situation. Wiping out an account by placing irrational trades or “suicidal” trading is an unconscious reaction to a stress factor, which is quite common.

Fear should be distinguished from cautious trading approach. A trader who trusts his own logic but avoids unnecessary risks has more chances to develop trading strategies which really work and grow more profitable and reliable over the time. Fear can tell a trader to stop and reevaluate his decision when the situation requires so. Fear can be quite difficult to overcome but it is possible with the right mindset and determination. Psychologists believe that the first step is recognition and awareness. And after that a progress can be achieved by a logical, calm approach to trading and planning. And do not forget, you should never invest in your trading more than you can afford to lose.

Trading Psychology: Greed.

In many cases, greed can have a huge impact on traders’ behavior and cause unexpected loss in situations when the result should have been the opposite. Greed is a strong motivating factor, in some cases it is synonymous to drive or inspiration, the emotions which are quite helpful as long as they are not overpowering rational thinking and discipline. Greed becomes unhealthy when it starts directing trading decisions, when logic steps aside and responses become inadequate.

It is quite natural for people to be money oriented. Money is a driving force behind many aspects of human life, but in trading it is very important to see the fine line between healthy motivation and greed. The first step for avoiding negative effects of greed is ensuring planning, discipline and eliminating overexcitement from the decision making process. By sticking to a trading strategy from the beginning and throughout the whole trading process, greed driven actions can be replaced by rational decisions, based on analysis and study.

Trading Psychology: Euphoria.

Euphoria can arise after a series of winning trades causing a burst of adrenalin and high hopes for unlimited wealth and prosperity. At this point of excitement traders need to remember that their trading success is determined by their rational trading decisions and solid trading plans. A streak of winning trades is not necessary indicative of future trading results, and traders should learn not to get carried away by euphoria of trading success.

The danger of euphoria in case of the novice trader who doesn’t possess enough expertise and skills is that a sequence of profitable trades can make him believe that his understanding of trading process is impeccable, set unrealistic targets and take unnecessary risks. To deal with euphoria and other problems associated with binary trading psychology, traders should learn to control their emotions and minimize the impact of impulsive decisions on their trading plans.

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Welcome To A Traders Reality.

When life surprises you. How do you maintain awareness in your trading?

Trading Composure opened my mind into realizing the mistakes i was making as a trader. It was only through Trading Composure that i became consistent. Read My Story.

This Course Is designed to change your trading psychology. Are You Ready For It?

Allow Me To Briefly Introduce.

The Stock Market is never obvious. It is designed to fool most of the people, most of the time. (Livermore)

The statement above pretty much sums up trading. Many people make the mistake in thinking it's easy to open an account, deposit some money and make one successful trade,"time to quit my job".

If only it was that simple.

Like "Price", the market manipulates us traders with our emotions. Don't be a Puppet.

So your here. You have probably come across many blogs, websites, market gurus all selling the premise of how to beat the market . (Laughs Out Loud) lets face it, If the market was developed to be "beaten" then we would all become bankers with deep pockets, taking from the market. But wait, hypothetically, if we all were beating the market, we would be bankers ( with loads of money) and there would be no bad traders making bad decisions, then there would be no liquidity in the market?

Does that make sense? Your probably thinking where is this going?

The purpose of my website is to introduce the true reality of how the market works . Many are still oblivious to how it works. There are traders that are holding their "indicators" as "Holy grail" or " beat the market with.." a MACD, Bollinger bands, RSI.

Now I am not advocating that these indicators don't work, but during my journey, I have found them to be quite laggard. They don't tick the boxes for me. I always feel that something was missing when I attempted to use them to trade.

The Final Piece is PSYCHOLOGY.

This website will include a blog that will talk about my daily trading activities. I will be discussing many of the problems that traders encounter when they enter into the arena of trading.

The goal with this website is to engage traders who are new to Forex and hopefully gather a community of traders that can share all psychological obstacles they encounter whilst they trade and what steps they took to overcome them. Also trading strategy discussions are welcome. This site is about engaging traders with traders at all levels. Trust me. Trading can get lonely at times.

Most and foremost, I thank you for visiting my website and hope that it can create value and bring you success with trading.