The world of Forex trading can be an exciting and heady place, but there are emotional issues that you need to be aware of if you want to trade successfully. There are a number of different technical Forex trading strategies out there and you need to be able to recognize which one is likely to best suit your needs. While forex trading gurus can teach you about the market itself, currency pairs, trading fundamentals, the use of technical indicators, and their own preferred trading strategies, at the end of the day it will be up to you which way to go. the one that best suits you.
There is a tremendous amount of hype surrounding Forex trading these days, but one of the problems, which is sometimes overlooked or (in some unscrupulous cases) deliberately avoided, is the emotional aspect of trading. Many people are comfortable with the learning process involved in acquiring the basics of technical training and learning to use the most common technical indicators. These same people are also generally comfortable with learning and, when possible, demoing the particular strategies being taught, while of course dreaming of the profits to come. And these gains are there for the taking, of that there is no doubt.
However, many of these same people will be unaware of the emotional pressure and feelings close to panic, which can be encountered when you press the button in a live trade. Therefore, you need to understand the type of person you are emotionally, and what type of trading strategy is best for you, to ensure that you don’t derail your trade before it gets off to a good start.
Broadly speaking, there are four main categories of Forex trading (or, indeed, general financial trading): Inter-Day, Intra-Day, Scalping, and Automatic Trading…
Trading between days or at the end of the day
Day-to-day traders place a trade on a day, which will typically not close on that day and can stay open for days, weeks, or in some extreme cases, months. Traders using this methodology should be comfortable watching the inevitable up and down swings that will accompany each trade in the belief that the overall market will move in the particular desired direction. They will probably check the position only once or twice a day and make adjustments to stop losses at the end of each day if necessary. Quite often this requires a level of detachment, which the most anxious traders may not be comfortable with, and similarly, quite often, the initial losses in these types of trades can necessarily be quite large. Seeing a trade move 100 or 200 pips into a losing position before turning a profit could tax the nerves and pockets of many new traders.
Intraday or daily trading
Day traders place and close trades within the same day and, depending on their chosen time frame, can close trades within 30 minutes to a few hours of opening. Initial stop-loss tend to be less than for intraday trading, but a good level of emotional control or detachment is still required as there will be potential swings in the market during trading time and a trade could, for example, , make an initial profit and then fall back into a losing position, before resuming the desired direction and making a profit again. The feelings of anguish when you decide to stop a trade in its losing phase (to minimize your loss) only to see it turn around and make a huge profit are not quickly forgotten!
scalp
Traders employing this strategy are looking to make a quick kill on the market, perhaps 10 -20 pips, and average trading times are usually only a few minutes. The emotional advantage is that the stop losses tend to be tight and you don’t have the same amount of angst in the trade, because it will usually be short lived. Many newcomers favor this method because of the limited financial and emotional exposure involved, and some use it as a confidence booster before attempting longer-term trading methods.
auto trade
Increasingly over the last twelve months, the markets have seen the advent of automated or robotic trading packages, in which, with the help of specific software, traders set parameters on their computers and the trading robots trade automatically. on your behalf 24 hours a day. five days a week. From an emotional point of view, this completely takes the involvement and fear out of the actual trading process, because you are completely free. However, you are, of course, completely relying on the particular Robot Trading Package technology to place and manage trades, and therefore the effectiveness of the package itself, which for some would induce a completely different type of fear. and anxiety.
Understanding your own emotional makeup will help you avoid choosing the wrong Forex trading strategy and experiencing fear, which can be potentially destructive to your early trading career. But if you pick the right one, you could be at the start of a whole new way of life.