3 Crucial Factors To Understand About Trading Psychology

3 Crucial Factors To Understand About Trading Psychology

There are many skills required to be a trader, and to be honest, the mastery of these skills sets the phenomenal traders from the average traders in the world.

Whether the best traders are trading for institutions or themselves – that doesn’t matter. What matters is that these traders have taken years and maybe even decades to master their craft and will continue to refine their art according to the ever-changing Foreign Exchange market environment.

This article will look at trading psychology on emotions, discipline, and mental readiness. In trading, we understand that there are two emotions that we need to understand thoroughly and keep in check: fear and greed.

Instantaneous Decisions

Have you ever found yourself in a situation where you are just placing trades very quickly without thinking through them and going through your checklist to spot whether or not that trade is part of the setups you should be taking? All in the name of “the trade will leave me behind.” I would like to believe you have, but if you haven’t, that is fantastic because it can be quite a downward spiral.

The biggest problem with making these quick decisions is that they don’t give you time to process risk well and plan how you will manage that trade if it is in your favor or against you. It is like giving the market your money freely.

Now, the problem with this is that it doesn’t serve you whatsoever. It stands in the way of progress and the growth you could experience if you had rules that you followed with DISCIPLINE.

Setting Rules

Many people don’t know or don’t want to follow the rules, which is fine. Still, if you’re going to be a Forex trader professionally, you cannot afford not to follow the rules because that will only set you back and, in the long term, weaken your mental toughness in the Forex markets.  

It is essential to have your rules written down somewhere to go back to daily and remind yourself what you may or may not do in the markets to succeed in trading Forex long term. When the psychological crunch comes, it will be essential to follow these rules you have set for yourself as a trader to don’t blow your account or even lose more than necessary on that day.

In this regard, setting rules means looking at guidelines for your risk: reward ratio that may keep your mind at ease no matter the outcome of that particular trade. It means setting parameters on entries and exits, as well as your stop loss and take profit for each position. 

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Research, Research, and More Research

The more you know about a specific Forex pair, indices, or commodity, the better equipped you’ll be to execute orders on that pair. When you understand all its movements, you can understand what you can expect, which will allow you to remain neutral no matter how turbulent the storm may be. The ability to remain objective in the Forex markets will occur more and more with TRUSTING YOUR SYSTEM!  

The truth of the matter is that less is always more. Now, this does not mean you focus on one pair forever. No, not at all! It just means when you begin your journey; it is essential not to be all over the place as that may cause confusion and frustration (missing trades and losing trades.)

The knowledge you obtain on a pair will also give you the confidence to execute but, more importantly, the ability to overcome fear. This information is not that you remain with a particular bias. A Forex trader will often look for the information that best supports their thesis on a specific Forex pair instead of allowing the data to inform their theory. The problem with this is that it doesn’t leave any room for learning and development as a trader.


You have to allow the knowledge to INFORM your bias and not vice versa.

Your rules dictate what you can and cannot do, nothing else.

You do not make decisions without thinking them through first.


Happy trading, fellow Traders!

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Emmanuel Maphosa

Emmanuel Maphosa

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