One of the biggest challenges that traders face when trading is psychological.
Why is psychology a very CRUCIAL thing? Because market price movements are very dynamic and these movements are beyond our control. Trading is not the same as a daily activity or physical business, where many factors can be controlled.
50% internal factors,
50% external factors.
If in forex,
20% internal factor,
80% external factors.
The forex market is a world market. Those who use USD are not only Americans or Europeans, but people around the world also use USD for business, trade, and economic activities.
The transaction volume and Market Value is so large that no one / any financial institution can control this market. Our job is not to try to control the market but to control ourselves.
So not infrequently we often hear advice that psychological factors are the biggest determinants of success.
50% Mindset,
30% Money Management,
20% Method.
Where mindset and money management are included in psychological factors.
Psychological ability is the ability to control oneself. This psychological challenge is much more difficult than the physical challenge because we face an invisible "opponent," which is ourselves.
1. BEAT THE EGO WANTS TO ALWAYS BE RIGHT.
Humans have perceptions, hopes, and beliefs that are considered truth, even though they are not necessarily true. It's just subjective. And humans tend to deny, reject and "rebut" everything that is not in accordance with their perceptions. This is what is called EGO.
I give an example, we buy at a price of 1000, what are our expectations? Of course WANT TO PROFIT, we hope the price will rise above 1000.
But the price even dropped to 950. So what do we do? Definitely waiting for the price to turn around, right?
Then, suppose the price drops again to 900, what do we do? Definitely waiting again hoping for the price to turn up, at least return to 1000, then we'll let go at the break-even point. MINIMUM NO LOSS.
This is a FACT, humans don't want to be wrong, don't want to lose, and don't want to fail because humans have an EGO, WANT TO ALWAYS BE RIGHT.
In fact, mistakes, losses and failures are commonplace, neutral, and not scary. After all, it can be studied and improved so it doesn't happen again.
However, because humans are EGO and EMOTIONAL creatures, making that (failure) appear to be something negative and should be avoided.
This is a psychological and mental problem. There is a psychological war within each of us. It takes maturity and maturity in attitude.
Therefore, the best solution is to prepare the risk in advance. Even if we fail, we are already prepared and we will not fall into bankruptcy. Preparing for risk is far more important than expecting profit.
There is a famous quote in the investment world that we must always use as a handle, Never invest money that you can't afford to lose. Only invest what you can afford to lose. Do not invest money that you are not prepared to lose / lose.
It doesn't matter if we make mistakes as long as we are able to take lessons from those mistakes so that we grow to be smarter, skilled and wiser.
2. GREEDY WHEN PROFIT CONTINUES.
Greed is the next psychological challenge when traders start to make frequent profits. There is greater confidence and self-confidence.
I'm not discussing Beginner Luck which is usually experienced by beginner traders (profit because of luck). Of course, this beginner luck will not be able to survive in the market in the long term.
But what I mean is a trader who has found a profitable trading system / method that fits his personality.
Forex trading is a business with unlimited profit and income opportunities. The potential is tremendous. This is where the danger lies, if a trader is able to consistently generate profits, they tend to be more EASY to get more and more.
Therefore, traders must have clear profit targets within a certain time frame. I personally for accounts that are aggressively targeting 50% a month, this is enough. No need to improve anymore, don't be "forced" even higher profit.
If the target has been reached in the middle of the month, then OFF TRADING is then until the end of the month, or you can keep trading but with smaller lots.
This business teaches us about the meaning of the words ENOUGH and THANKFUL. Anything that is limitless (or superfluous) is self-destructive.
Learn from A PROFESSIONAL GAMBLE. Don't be addicted / continue trading, know when to it's stopped. ORDER and DISCIPLINE!
3. WANT QUICK REVENGE.
When we experience a loss (cut loss for example) we usually tend to want to return the loss as quickly as possible.
The next transaction is "required" to get a large profit while being able to cover the previous loss. The demand for the word MUST is a burden on psychology.
If beginner luck does this, it will definitely be even more destroyed because they don't have the knowledge. Only rely on emotions and lust for revenge alone.
Experienced traders even though they already have the knowledge but still have to be patient, careful and don't rush to take revenge.
We need to be aware that loss is part of business risk. Ego must be controlled. Don't blame the market, take responsibility, admit mistakes, and accept failure as a learning process. LET IT GO and MOVE ON.
There's no need to rush. The market is always there. We can still trade again next week / next month.
Remember one thing, as long as there is capital (equity), it means that we always have the opportunity to recover the losses that have been lost. EQUITY AND PATIENCE is everything.
Those are the three psychological challenges that traders always face. The biggest challenge in running this business is not from a technical/scientific side, but from a human and psychological perspective.
Trading is a business full of HOPE. Besides Fear and Greedy, Hope can be the biggest enemy faced in trading. We must be able to manage the expectations that surround the mind so that we can approach this business more rationally, not emotionally.
Realizing that this is a world market, our job is not to try to control the market but to control ourselves. If you cannot control your emotions, you cannot control your money ( by. Warren Buffett ).
CONSISTENT AND OPTIMAL PROFIT GREETINGS.
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