The word psychology itself is a large word in this day by day changing world. But in our case, psychology means trading psychology.
It merely resembles our perception of how we take the ups and downs in trading in building a milestone for our success.
It happens sometimes; that even a successful trader has to face the downfall of his trading carrier just because of being overconfident, he will definitely win the bait. And that all happened not due to lack of knowledge, but due to the insight feeling that urges him to do without logic.
All this thing happens due to our perception, or here in this article's context, psychology is responsible.
As the overconfidence overshadows the successful carrier of a trader, likewise the fear of losing or low spirits also cast a negative impact on a trader's performance. And this is also due to psychology.
Before the opening of the market, a trader seems very calm and composed. As soon as the real market scenario opens, emotions start their roles. They try to overrule the strategies that the trader has decided.
If a trader is desperate to earn a profit, he has to overcome the feelings of greed, excitement or disappointment about losing the trade.
There are many types of psychological biases a trader may have, which he has to overcome while trading. We will discuss them one by one down
Anchoring bias – This we can say a type of psychological state from which a trader doesn't want to come out from. It means he biases himself to the past market trend and expects the future to be reflected likewise.
One has to be very careful in speculating future market trends by changing strategies according to market fluctuations.
What it actually means by coming out of the comfort zone is taking decisions' according to changing statistics instead of merely relying on past trends and strategies.
Currency pairs are subject to change their values according to demand and supply rule, and thus the trading strategy of a trader should also change to gain profit. So according to this psychology, if one stick to only one strategy by assuming the future trend will follow past, one is most probable to incur a huge loss.
Confirmation bias – Being fearless in trading is good but considering your success is confirmed comes in the ambit of confirmation bias psychology.
According to this psychology, a trader justifies his decisions even when they have been proven wrong and yielded him a loss.
One should do proper research about the changing prices trend in the currencies and then choose the best strategies; then only one can conform himself that he will gain a profit.
However, one has to be flexible enough to change his plan intelligently to minimize losses and by overruling confirmation biases.
Loss overcome bias – This is a kind of psychological state where a trader faces the fear of losing out something. i.e. he finds himself in a less competitive position compared to other successful traders. His hopes continuedly to decline, and he keeps on consolidating his heart that the lost prices will return back and he will earn some money.
Although this psychology sometimes becomes so powerful that a trader compensates all of his debt. Because this phenomenon sometimes works like adrenaline and stimulates the mind to perform like a pro.
Overconfidence bias – We humans have self-made egos that we are the best, and nothing else matters. This is a type of mania every trader cherishes in his mind.
One more thing a trader shows off is about his perception about the market that 'The market will reach here by the end of the trade ', which also gets him in trouble.
His overconfidence that what I am doing is 100 per cent right also boil down him to face loss. Boasting about your persona as if you don't make any mistake also put you in the cave of nothing.
A trader should not be afraid of making mistakes and learn from them. He has to make his mind that the mistakes that he has done are inevitable and can't be undone too, so instead of hesitating of committing mistakes one should take decisions and leave the gut feeling of being almighty in the stock market trading.
While trading in currency pairs, these gut feelings dominates over every trader. In this article, we have come to know about the sense of fear, overconfidence, lack of confidence and anxiety.
A successful trader learn from his past mistakes and looks forward to grabbing new opportunities by overcoming all of these feelings.