How to develop winning psychology in forex markets?

1. How to manage emotions

Those who attended my seminars or forex coaching programs already know that I consider psychology to be the most important factor when trading comes to play. It happens very often that after few bad trades we start to lose all the time. Also, it happens that after few winning trades(!) we lose the grip and start to be losing money!

Ever happened to you? That happens to all forex traders. Writing about ‘fear’ and greed’ would be too easy. Everyone knows this and each psychology book for traders talks about it. I will present to you different concept which will be more helpful.

Firstly we have to talk a bit about how our human mind works. It happens that our experiences cover up our perception. This results in having wrong attitude on what is really going on. Very often our perception is covered by either ‘recent experience’ or ‘deepest experience’ and I mean by that experience that has been written deep into our mind and we still remember it.

So whenever something bad happens to us we tend to look at the future from this perspective. If anything good happens we look at the future in positive way. In both cases we ‘lie’ a bit and we trick our mind a bit. We do it unconsciously. But the truth is that apart from the fact that we ‘lie’ it is better for ourselves if we do it in ‘positive way’.

Knowledge about this fact is very crucial. Try to remember what happened last time when you lost a game? What happened when you had 2-3 for consecutive loses in a row? Most of the traders lose their game in this moment and start to bet even more. Of course this brings even more loses and soon we go bankrupt. Sounds familiar?

On the separate note this may happen also when we win! Because our mind becomes less ‘aware’ after few wins and we start to break few rules.

So how to overcome this pattern? There is a way to do it.

Channel change

This is concept which I found in one of personal development programs and it did strike me how true it is! It did not took me a long time to notice that this technique can be applied also to trading. Here is how it works.

Our mind likes to ‘go into details’. You probably have noticed that the more time you sit in front of your PC watching charts the less you understand from it. It is a paradox but that is how it works. On the other hand you probably noticed that people who start trading for first time(mostly on DEMO accounts) or those who come back to trading after some break get good results. This is another paradox and there is explanation for it.

As I wrote – our mind likes to go into the details. When we see something for the first time we look at it from more ‘general’ level. But the more time we spend watching it we begin to see more details and our first impression is changing a bit. It is very dangerous for all traders as it takes away from us ‘decision power’. The more details we see on the market/chart the harder it is for us to make a right decision. It’s almost like our thoughts are formed like fractals that can be split into parts, each of which is a reduced-size copy of the whole. Have you ever seen Koch snowflake?

Above example illustrates first six phases of Koch snowflake/star creation. First we have triangle. Then we add another, smaller one in on third of each of actual triangle’s arms. Then we do the same with existing triangles, and again. This process is endless. Please notice now much our first shape(A) has changed and compare it to the sixth one(F)! This is very similar to what happens in our mind when we think too much about the market.

So what can we do? We can ‘change the channels’. Channel is a thing/process that we are currently focused on. Whether it is trading, driving car or anything else. It is something we do now and nothing else.

When you find yourself in a situation where your mind is losing sharpness you should immediately ‘change the channel’. Go away from the PC, do something else. What is important is to focus on anything else. But it has to be done in very serious way. Whatever you decide to do you should put your heart in it. So if you go away from the PC/charts but you still think about it you will not get any results.

Whichever channel we decide to chose we have to focus on it 100%. This means that we can not think about other things. This is a MUST DO condition to make channel change successful.

The best ‘channel’ to use is when we decide to have some fun. Go talk to friends, drive a car or whatever brings you joy. When you are back after few hours(or days sometimes) you will notice that your mind is clear, sharp and you see things on the chart COMPLETELY different than before! You will also notice that your decisions are better.

Have a good trading!
Sylwester May

Article Source: http://www.articlesbase.com/currency-trading-articles/how-to-develop-winning-psychology-in-forex-markets-1250831.html

Article Tags: FOREX, Trading, Markets, Winning