Kingdoms have fallen and battles have been lost the moment men let their emotions get the better of them. Since the world’s greatest warriors and kings have fallen prey to their own emotions, how can mere traders avoid the same death trap?
The answer is simple: it’s all about having the right mindset. Consequently, price action trading is a good foundation to use for developing the right mindset. This system consists of several fundamental principles.
Focus On Managing Your Emotions Instead Of Ignoring Them
Emotions are not your enemy. This is extremely important to understand. Ignoring them will not help you at all. If anything, they will simply make you more prone to bad trading decisions. What’s more critical is being the master of your emotions with the right mindset rather than the other way around.
Avoid Overanalyzing Forex Trading
Some traders are so opposed to the involvement of emotions in their trading strategies that they go to the extremes and over analyze their next steps. Again, doing this will only backfire on you. When you overanalyze and even over-complicate your trading strategies and market trends, you will simply end up confusing yourself.
Remember that every complicated equation can be broken down to various simpler equations. In fact, it’s one of the golden rules when writing algebraic equations: the simpler, the better! It’s the same with Forex trading. If a system proves too complicated for you, then forget about it! If it works for another trader, good for them! But don’t let that sway you into knocking your head against the wall. There are many other systems you can try – and some of them will surely prove much more suitable to your personality and preferences.
Stay Objective
If you succeed in emotional management, then you will be able to use your emotions to help you stay objective. With emotional management, you’ll know which emotions to believe in more. If you are presented with a very high-risk investment that you do not understand but your friend recommends, what should you do? Greed will tempt you to bet on it, but your instinct for danger will warn you against doing something foolhardy.
With successful emotional management, you will be able to take the more objective middle ground instead and that’s to carefully research your options before making any decision.
Constant Training And Practice Leads To Permanent Habits And Mindsets
Consistency and constancy are essential in making price action trading a permanent part of your mindset. It’s not enough to know how price action trading works. It’s not even enough to be aware that emotions can have a positive and negative impact on your life. You should also make a conscious effort to apply your knowledge to your trading decisions. It’s all right to forget these principles once in a while, but don’t let that hinder you from trying again.
Having the right mindset will not make your strategies fail-proof, but it can significantly reduce your risks of incurring heavy trading losses. With the right mindset, you become more aware of the pros and cons of your decision and that’s more than what you can say about other traders.