16 July, AtoZForex – As a retail trader, especially for those who are still searching for their trading strategy or has not establish the trading principle to strictly follow, your ability to trade is dictated by your inner Forex beliefs not just about the market but everything to do with how you handle money, pressure, success, fear, confidence, failures and many more.
As what the veteran trading coach Van K Tharp quote “You don’t trade the markets, you trade your beliefs about the markets".
Forex trading psychology
Your belief can act either limit or drive to your actions. Let’s give some examples. If you believe trading Forex is risky, then you may either not trade or try it but conservatively. If you believe that for every trades you take must be a winning trade, then you may opt to not use a stop loss. If you believe that technical analysis is all you need to succeed in Forex, then you look at news as fabricated information that has a conflict of interest. If you believe that trading Forex is no different from gambling, then you will either try your luck as what gamblers do. Or refrain from taking into account if you dislike gambling. On the other hand, if you believe that Forex is another form of business that can potentially return exponential gains, then you will treat your Forex trading with proper management.
These beliefs, particularly money related beliefs, become the underlying factor on how you operate; be it negative or positive. For some, counterproductive beliefs tends to reflect in holding a losing position to avoid taking a “loss.” Or they close their winning positions too quickly without holding on for the bigger wins. These are difficult to let go as it has been developed out of a painful or formative experience or are perhaps instill in our culture as an accepted principle.
Your Forex beliefs
Although such principles are difficult to change, have the ability to be conscious about our beliefs and their results. You can then make a conscious effort to renew your beliefs and choose what is better for you.
Try treating your beliefs like clothes. Some clothes are good but don’t fit us, while some are perfect for our taste ans style.
But before we even try to change whatever limiting beliefs we have, we need to be aware of our existing beliefs. If you can list down at least 10 Forex related beliefs that you currently have, we would have a strong start. By writing down your beliefs, you begin to become self-aware. You begin to see how the beliefs you have run your life and your Forex trading. At this point, you can name the belief which are and aren't useful to you.
Forex beliefs of successful traders
The next question to answer is how would I know which belief would fit for me? The best advice is to seek from the well-proven beliefs of successful traders. You could pick the best Forex beliefs that you thing are right for you and stick to it with rigid discipline and confidence.
- #1 Successful traders believe that they are the secret component to their own success or failure.
- #2 Successful traders believe that if you have a deeper “why”of trading, the easier the “how” is.
- #3 Successful traders believe that trading is a game of probability and understand positive expectancy.
- #4 Successful traders believe that they must trade differently in different market types.
- #5 Successful traders believe that to achieve consistency, they need to use position sizing (money management) not just through their entries.
- #6 Successful traders believe they must have an edge over the market.
- #7 Successful traders believe in having a simple entry and could have multiple exit strategy
- #8 Successful traders believe in letting their profits run and cutting losses short.
- #9 Successful traders believe before entering a trade, the risk/reward ratio has to be established first.
- #10 Successful traders believe in keeping a mental map of the market condition and compartmentalized pairs of the same market type.
- #11 Successful traders believe that they could be wrong and are willing to adapt.
- #12 Successful traders believe that trading is a serious business, not a hobby.
- #13 Successful traders believe in using journal perpetually.
- #14 Successful traders include post trading analysis to understand if there is a need for readjustment.
- #15 Successful traders believe they are very similar to athletes where they practice rigorously before the competition.
If you believe that you have similar Forex beliefs like top traders, then you are halfway way through to become a successful Forex trader.
If you think that you have to change many of your beliefs, it's already a good start. Decide which money and Forex belief you want to change and adopt new ones starting now. It will be a working progress and it will take some time, but the journey towards a newer you will pay off at the end.
Think we missed something? Let us know in the comments section below.