Forex Trader Psychology- Self Analysis vs. Technical Analysis
Forex Trader Psychology- Self Analysis vs. Technical Analysis
So you've probably all heard of technical analysis right? If not you probably have not been around the forex markets very long. Technical analysis is the study of charts. Traders do this to try and read what is going on in the markets in order to make informed trading decisions. The internet is awash with technical analysis and trading systems which are based on it. Nearly everybody is trying to become a great analyst.
But sadly most are overlooking a far more important area of analysis: SELF ANALYSIS.
Hardly anyone looks at themselves, but this is actually a far more important task than market analysis. Self analysis involves looking at your self and reading your own psychology. This may sound a bit abstract, but it is very important that you learn about yourself as a trader. Now if you are a system trader, self analysis is not as important for you. But if you use discretion, self analysis is extremely important.
How often have you had a great trading run? Most of you who have traded for a whilecould have had some very good spells where everything works. Was this pure luck? Well there may have been luck involved, and market conditions may have been good for your strategy, but there's a good chance that there was more than this involved. You see you would likely have felt pretty confident and you were able to make decisions with little or no hesitation. This is how trading should be, easy!
However for most people this run will end eventually. Often things will then swing the other way and you will start losing consistently, you will struggle to make decisions and you will be low on confidence.
This is where self analysis is important, and what I'm talking about is constant self analysis. When you were winning you had a wining attitude, this led you to win more trades, but eventually you had a few losses and this created a losing attitude, which in turn led to more losing.
Successful traders always have a winning attitude, no matter what is going on. Everybody experiences drawdown, its just a fact of trading, but it's the affect this has on your psychology that causes the problems, rather than the losses themselves. This is where self analysis comes in, by looking at yourself every day and asking yourself are you fit to be trading? You will avoid trading when your mindset is not right.
I can almost guarantee that you deep down know when your frustrated and feeling overwhelmed, do you think it's a good idea to be trading when you are like this? No it isn't, because you cant tap into your ability to use your discretion, which is essential if you use it to make trading decisions.
You should be asking yourself am I fit to trade everyday. Only when the answer is an unequivocal yes should you proceed. If you are in anyways affected by fear, greed, euphoria or frustration, you must not trade. This is because you do not have a winning attitude, and without it you wont be-able to trade successfully. If you feel you are not fit to trade you should take a break, perhaps a day or so, and only begin trading again when you can absolutely say without doubt that you are in a mindset that is conducive with producing results.
Most people however do not believe they need to perform such a task, they feel they are above this and that they will be-able to trade no matter what. I want you to leave these kind of people in your dust and start taking the steps necessary to becoming a successful trader, one of these steps is self analysis.
To find out more about trading psychology visit my website at Forex Trading Uncut.
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