Emotional Characteristics of a Successful Forex Trader

Emotional Characteristics of a Successful Forex Trader
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Essential Elements

One can be very knowledgeable about foreign exchange trading (Forex), but this will not help if this individual does not have the courage to put their money at risk, through the buying and selling of currencies. Of course it would be logical to assume that if you’re well versed in Forex, hitting the buy key, or the sell key, should be easy. However, many traders become “paralyzed” when it comes to parting, all be it temporarily, with their money.

When the time comes to execute the trade, it is not unusual to start to feel that horrible anxiety, which shortly after becomes fear. After all, “no risk, no reward”, and the moment of truth is upon you! It becomes necessary to overcome your fear and act. If you cannot overcome your fear, you must accept it, and move forward with the trade regardless, otherwise you will never achieve you goals as a foreign exchange currency trader.

If one learns to control their fear of executing those trades, the process of trading becomes easier and easier, until finally, there is no more fear. This is for the most part good, however this opposite reaction can become overconfidence, which can create just as much of an issue as fear. If you’re overconfident, it means that you are not focused enough, and taking great risks with your money when trading.

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Analyze yourself on an emotional level. Ask yourself if you’re someone who can control their emotions on a level which will allow you to execute trades. Keep in mind that you will often have to execute these trades under extremely stressful conditions. Whatever your emotional obstacles may be, whether overconfidence or fear, I’m sure that they can be overcome to enough of an extent, through practice while paper trading, and perseverance, before you execute your first real trade. By calling attention to fear or overconfidence as potential stumbling blocks beforehand, you will have the opportunity to develop good trading habits from the beginning, and properly prepare yourself, for executing Forex trades.

“Pulling the trigger” or executing the trade is not all there is to focus on when involved with Forex. Once you have executed, and are in the trade, what comes next is staying in the trade. This is equally, and for some, more difficult on an emotional level than the actual trade execution. When a trade is not working, it becomes necessary to exit it as soon as possible. However fear can cause one to prejudge a situation inaccurately, and exit a trade prematurely. It is important to be able to identify valid reasons for exiting a trade, because there are times when a “hold on until it comes back” strategy will allow you to profit greatly when trading currencies. It would be very disappointing to close out a winning position as a result of “jumping the gun”. Learn how to analyze valid reasons for exiting a trade. This of course, is to be done when practicing or paper trading.

All in all, the emotional requirements for trading currencies include courage, patience, self control, and drive. Focus on developing these emotions, along with your skill, and you will find yourself making logical decisions on every trade.

Many who are new to the Foreign Exchange Market, believe that all that is necessary to trade Forex profitably, are charts and technical indicators. The majority of these new traders end up loosing every dime that they put into the market. While charts and technical indicators are important, a solid knowledge of Forex, good money management skills, and emotional control, are equally important.

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