3 Dangerous Assumptions In Forex Trading
It is true that the expectations we have for ourselves play a central role in affecting our emotions and even our actual experience. In particular, waiting for a good result makes us feel excited while foreseeing a negative result makes us worry.
This is why forex trading psychologists have highlighted the importance of setting the right expectations in order to have the proper trading mindset. When you set expectations that are too high, you could be setting yourself up for failure and disappointment. On the other hand, when you set your expectations too low, you might not be doing enough to challenge yourself.
The first irrational trading expectation is that working hard means taking on more trades. This kind of assumption fails to take note of the quality of trades into account. It would also make one prone to overtrading because it says that a larger number of trades could increase the probability of ending profitable.
The next irrational expectation is that a good day means a profitable trading day. This doesn't take into consideration the nature of forex trading, wherein one will always wind up with losses or losing days. This forgets to take a look at the analysis done and the discipline practiced in sticking to a trade plan, even if the result is negative. This may have been so because market sentiment suddenly shifted or a surprise event took place. In this case, remind yourself that as long as you did the trade analysis properly and followed your plan, it could be enough to call it a good day.
The last irrational trading expectation is that the measure of success in forex trading is being able to live off the profits. Remember that not all traders are able to end up this way, as it requires a huge amount of skill and capital.
Take note of these assumptions and try to avoid them as much as possible so you can stay level-headed and on top of your game.
This is why forex trading psychologists have highlighted the importance of setting the right expectations in order to have the proper trading mindset. When you set expectations that are too high, you could be setting yourself up for failure and disappointment. On the other hand, when you set your expectations too low, you might not be doing enough to challenge yourself.
The first irrational trading expectation is that working hard means taking on more trades. This kind of assumption fails to take note of the quality of trades into account. It would also make one prone to overtrading because it says that a larger number of trades could increase the probability of ending profitable.
The next irrational expectation is that a good day means a profitable trading day. This doesn't take into consideration the nature of forex trading, wherein one will always wind up with losses or losing days. This forgets to take a look at the analysis done and the discipline practiced in sticking to a trade plan, even if the result is negative. This may have been so because market sentiment suddenly shifted or a surprise event took place. In this case, remind yourself that as long as you did the trade analysis properly and followed your plan, it could be enough to call it a good day.
The last irrational trading expectation is that the measure of success in forex trading is being able to live off the profits. Remember that not all traders are able to end up this way, as it requires a huge amount of skill and capital.
Take note of these assumptions and try to avoid them as much as possible so you can stay level-headed and on top of your game.
posted by Vittoria @ August 06, 2013
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