Lesson 9 – Trading Psychology

trading psychology

Trading psychology is one of the most important topics in Forex trading. Traders using demo accounts, i.e. trading with virtual money, show good results. However, when switching to real money their results worsen significantly. The trader, the currency pairs, and the trading system are all the same, but the result is different. Why is that? It is very simple: the influence of psychological factors. When trading with real money, emotions such as greed and fear are influencing and disturbing the trader’s mind, making it difficult to assess the market objectively, to close unprofitable trades on time, or to fix profitable trades.

Why is understanding trading psychology so important? Because it is a unique place where you do not know yourself so well.   You think that you already know yourself? Well, Forex trading is a real-life test to check your patience, greedfeardetermination, and other emotions.

Of course, since you are a newcomer and are going to trade in a demo account with virtual money, the real emotions are not going to reveal themselves—reality is needed for that. Despite this fact, it is still necessary to prepare for entering real-world trading. These emotions will be your main enemy that will interfere with your trading.

If a person has anxieties and is impatient, should he/she consider trading in Forex at all? The answer is yes. All emotions can be mastered—you just need to put in some time and effort. Patience and determination can be learned, and fear and greed are resistible up to a certain degree. There are a lot of methods to managing emotions—please check the Psychology section in our website (and read additional literature).

Basically, discipline can help you deal with all emotions, and it will help you put in the work needed to successfully achieve your goal. Discipline will also help you stay focused and optimistic when you are experiencing unprofitable times.

To a newcomer, even a series of successful trades can be negative psychologically. Why? Isn’t it natural to be glad when you earn money? Yes, but a newcomer evaluates a successful close of several trades as a victory. The fact is that we should count all of the trades that we have made within a fixed period—for example, three weeks, a month, or a year. We are adding up all profitable and unprofitable trades, and we will see how much we lose on average, and how much we earn. Seeing the net result of a particular period, we can evaluate it correctly. In addition, if we want to try to achieve a long-term result, we are going to evaluate all unprofitable and profitable trades as a part of the trading process. However, this is not important at the moment, and therefore we are not going to grieve over every unprofitable trade or take pride in every profitable one.

Here are my suggestions:

  1. Never be in a hurry.
  2. Always follow your trading strategy.
  3. Try to stay calm in all situations—direct your emotions somewhere else.
  4. Do not trade if you are tired, sleepy, or angry. The Forex market will still be there tomorrow.
  5. Take care of your mental state and improve it by gaining new skills. If you learn new strategies or indicators, also learn how to train your emotions. Remember that only mental stability can guarantee profitable trading.

Please read the following posts:


your homework forex

1. Open a trading platform (demo or cent account) and try to trade.

Now your task is to maintain a 1:3 or 1:2 ratio between Stop-Loss and Take-Profit. For example, if a price goes against you, the Stop-Loss is going to be executed. But if a price develops the way you hoped, do not fix a small profit right away; instead, wait until the profit is going to be two or three times bigger than the Stop-Loss size. Make 20 trades and analyze the results. Also analyze your emotional status when you experience losses and profits.

I wish you success!

Do you have any questions? Please write your questions in the comments section—we will do our best to solve them with you!