The difference between success and failure in forex often has as much to do with simple human psychology as anything else. Cultivating the right mindset and attitude is key.
It is easy to bring your emotions from your daily life to trading and it’s even easier to let these emotions cloud your judgement. When your mind is focused on the money you need, your relationships, or your problems, it makes it difficult to keep your mind on the chart.
Sun Tzu, the author of the ancient Chinese treatise The Art of War, said: “Every battle is won before it’s ever fought”. This is as true for trading as it is for the battlefield.
This is why the best traders know that the most important trading strategy is clearing the mind and focusing on the process of trading, not on the outcome. Developing good trading psychology is no less important than knowing your trading setups or having good chart reading skills.
The optimal state of mind for trading is a “flow state”, often referred to as being “in the zone”. When a trader enters the flow state they feel no rush to get into a trade, instead they patiently observe the price action and wait for a good opportunity to appear.
The opposing state is being anxious, which triggers fast thinking and reactive decision-making, leading traders to make emotional rather than rational decisions. Needless to say, this does not usually lead to trading success.
Let us look at the trading psychology methods used by two of the the winners of our #OnlyTheBest forex trading contest. Out of 13,500 total participants, users Fxvt and Easylove (their contest names, not their real names, obviously) earned more in profit than nearly all their competitors. What did they do to prepare mentally for the contest?
Fxvt practiced visualization, a powerful technique that involves focusing on the desired outcome, along with deep breathing and concentration. Easylove’s method was slightly different; he listened to his favorite music before starting his trading day. We didn’t ask him what sort of music it was but it must have been relaxing; he made more than 1000 trades during the contest with an unbelievable profit factor of 14:1!
We recommend you find your own method for finding flow state. In addition to visualization and music, you may have luck with the following:
Before starting your trading activity for the day, try writing down your thoughts and emotional state. The secret here is to be specific. Don’t just state that your emotional condition is “good” or “bad”, but try to describe the nuances. Recall the last time you felt whatever you are feeling at the moment. Recall what you did in terms of trading. Reflect on the result, good or bad. This can be a powerful tool that can help you build emotional self-awareness and self-discipline, which are key traits of good traders.
Concentrating on breathing can be a powerful way to promote focus and concentration. It is no coincidence that it is a foundation of most forms of meditation. When you concentrate on your breathing, you anchor yourself in a balanced state of mind.
We live in the world of distractions. Notifications from messengers and emails can make us lose focus. By switching off all devices that you don’t need during a trading session, you may see positive results.
Before you start your trading day, clear your mind and anchor yourself in a flow state. Develop your own routine to reliably enter this state. Trading is a mind game, and your mind is the first tool which you should manage.
RELATED: To learn more essential forex strategies, read our free eBook; 7 Secrets Of #OnlyTheBest Traders