PSYCHOLOGY
Psychology of Trading- Why most traders lose
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In this chapter we will be covering what it takes to make up the perfect traders mindset and what not to do. The 5 key topics are: Doubt, Fear, Revenge, Greed and Over Confidence.
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Success is like an Iceberg
The main thing you need to have complete control over when trading is your “Emotions”. If uncontrolled they can lead to silly mistakes which will drag you off your trading plan and potentially into losing a lot of money.
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Emotions will take over you at first but it’s that ability as a successful trader to emotionally detach yourself from money as well as all the negative thoughts that may come into your mind while you trade. A positive mindset is just as important as your trading strategy, without this you will just join the 90% of traders that fail in this market.
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In order to do this we need to think and trade in pips, think about how many pips you can make instead of how much money you can make. Making small differences like this will be a good start as it stops you acting irrationally and chasing money.
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So the main 5 emotions we will cover are:
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- Doubt
- Fear
- Revenge
- Greed
- Over confidence
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Why do 90% of traders fail?
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The majority of people fail in the Forex market because they are under the impression that it is a “get rich quick scheme”, you can’t just flip £100 into a million pound. These unrealistic expectations will make you think like a gambler not a trader, this is the wrong mentality.
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The pressure these unrealistic expectations have on your mindset is destructive, it will work against you, feeling like you “need” to make money. If you are to succeed in the Forex market you need to trade with absolute clarity and you can not let stress or emotions control your actions.
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You have to be financially comfortable and happy to take a loss because they are inevitable. You have to think of trading like running a business, you will have overheads and things you need to pay out for; but in the end once mastered trading will be a hugely rewarding business.
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FEAR- "WHEN A LION ATTACKS IT'S PREY, IT DOESN'T THINK-
WHAT IF I FAIL?
WHAT IF I HURT MYSELF?
IF I DONT CATCH THIS ZEBRA IM GOING TO BE STARVING?
WHAT WILL MY OTHER LION FRIENDS THINK ?
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IT SIMPLY FOLLOWS WHAT IT KNOWS AND ATTACKS!"