There are several different types of psychological forex traps that beginner traders can be affected by. By knowing what to avoid, and by being able to control one's emotions, beginner traders may begin to take the first few steps towards becoming successful, professional traders.
It is easy to fall into forex market psychological traps, as they are often a result of something being overlooked, overthinking, or simply being unaware of the facts.
The following article will cover the typical psychological traps that beginner traders can fall victim to when they are just starting out. This article will also provide traders with useful forex psychology tips that they can use to avoid these traps and stay on top of their game at all times.
One major assumption that is incorrect with forex trading is the assumption that it will be 'easy' to make continual profits. Basic forex market psychology tells us that we should expect losses when trading on the forex markets, that we should account for them, and that we should make sure that we can cope with them.
That doesn't mean that forex traders cannot be hugely successful in the markets, but even the top forex market traders will tell you that losses are simply a 'part of the game', as well as something that you should 'plan for'.
Just like in the gambling world, one major win on the markets could lead a beginner trader to think that they will win every time, but this is simply not the case. The forex markets are unpredictable, and can often move in directions that even the greatest trading minds cannot always predict.
The Markets Are Not Random
Markets might be unpredictable from time to time, but they are not random either. Market prices move according to the time and values of transactions, which occur within specific time periods. They are affected by news developments, economic data releases, and much more.
All of these things will commonly cause the markets to move either in a bearish or bullish direction, and it's even possible to learn from the past in order to understand the present or the future of the markets.
For instance, if there is a recession looming, traders can view how the markets performed during a previous recession, in order to predict how the markets might perform during the next one.
Demo Accounts vs Real Trading Accounts
A common misconception that forex beginners might make is that their experiences trading with a demo account will match those that they will encounter with a live trading account.
The key thing to keep in mind when transferring from a demo account to a live trading account is that your capital will now be at risk. Your emotions will now also become a factor, because when you were trading with the demo account, you had nothing to lose. When you are trading with a live account, you now have something to lose, because your capital is now at risk. The game has changed, the rules have changed, and therefore, your approach to it must also change.
Now that you are trading with a real trading account, you might experience difficulty in terms of managing your emotions while trading. For example, if you make a major loss, it might be tempting to quickly try to recover your losses with another trade, which would likely lead to further losses.
With a free demo account, you get a chance to establish a winning strategy without losing cash. We offer a risk-free way to try your tactics under real market conditions.