How your thinking shapes your trading

Regular forex users are generally very well-versed in the different aspects of Forex trading.  One thing that many traders are not as aware of is how their individual way of thinking may impact their trading decisions for better or worse.  Knowing what sort of changes to expect when you begin trading will influence your trading psychology for the better.

Most people experience a slight change in how they perceive things once they begin trading.  There may be some degree of hesitation when you start trading in real life, especially if you have practised with demo accounts in the past.  This extra sense of caution that many people feel is justified, but it should not hinder one’s progress.

Another behavioural change that affects many people when they begin trading is becoming overly confident.  Sometimes traders take needless risks because they fail to keep the possibility of a loss in mind.  This can have negative consequences for anyone who trades for any amount of time if they do not reign in any compulsive tendencies.

Because one’s judgement is affected by either overconfidence or fear, it is important to fight against both of these problems.  A realistic expectation of possible profits, as well as recognition of possible losses, helps put things into their proper perspective.  A healthy degree of confidence can easily overcome both fear and overconfidence.

Using some sort of reliable trading plan helps remove the difficulties and problems that come with relying too heavily upon emotions.  One of the advantages of using a plan is that risk management becomes an integral part of it.  When you factor any possible losses into the decisions you make, it will greatly minimise the possibility of making reckless mistakes.  Trading with a plan in place will therefore always make things more profitable in the long run. 

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