The Psychology Behind Forex Trading

During online forex trading, it is all too easy to allow your emotions to take over, particularly in the midst of a difficult trade. When your money is on the line and your heartbeat begins to race faster, this is when emotional trading really kicks and is also when you are most likely to lose money.

Your feelings will be closely tied to your forex trading account, and this is no surprise considering you are trading your hard-earned funds in the hope of generating a profit. However, the more emotional you are, the less money you are going to make from online forex trading, and this has been proven time and time again.

Psychology and the Brain

The brain is divided into two lobes: the left lobe is the analytical part of the brain that is objective, scientific, intellectual, rational and logical. It is also the scientific part of the brain.

On the other hand, the right side of the brain is the imaginative side. It is subjective, intuitive, sensitive, introverted, unconscious and artistic. It is also the emotional side of the brain.

How Psychology Influences your Trades

Psychology plays a hugely influential role in forex trading. When we act logically we are using the left side of the brain to trade forex. When dealing with problem-solving we are using the left side of the brain to be logical in our decisions.

However, every time we become emotional during forex trading we are using the right side of our brain. If we use the right side of our brains to solve our problems we will be basing our decisions on emotion rather than logic, which will eventually result in major market losses.

To avoid FX trading from the right side of the brain it is important to develop a detailed trade plan – and stick to it. This will ensure that we trade consistently using the left lobe.

In addition, it is recommended that you switch off the Profit and Loss button featured on your forex trading platform. Not only is this distracting but it is also incredibly variable throughout the trading day and is an emotional indicator for a trader.

To Conclude

Learning to lose in online forex trading is a tough lesson, but is also the single most important lesson a trader has to learn. No single investor’s forex trading account is 100% profitable at all times. A great deal of one’s success comes down to following a trading plan, avoiding trading on emotion and using logic and common sense.