Learning the art of forex trading psychology will help you save lots of money from being lost in the financial markets to bad decision-making. You’d rather not trade or invest if you have not mastered your own emotions while trading. It’s all about the mindset when making informed decisions in the market! Stop losing money based on low emotional IQ or in other words stop letting your trades hit your stop loss while not letting your trades hit your Take Profits. We’ve all been there, but the successful traders are the ones that let their trades hit their stop loss OR their trades hit their take profit all the time.
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You may have a Trading strategy that has a high win rate of 60% and a risk-to-reward of 1:3 for every trade on paper. When most traders execute these trades on the live markets, they usually take profits early (say an RR of 1:1), and always let their trades hit their stop losses (almost 9/10 times a trade is placed). Your mind and body are known to inhibit certain traits of fight or flight when under a situation of duress. This fear, anxiety, and frustration, the thought of you losing money, or the price action going in the opposite direction, compels you to hit the sell button early. This is how money flows from the impatient to the patient.
This is a great internet resource on how you can avoid irrational decision-making while trading: https://www.dailyfx.com/education/trading-discipline/manage-the-emotions-of-trading.html
The highest risk-to-reward trades are usually the trade sets that find trend reversals in the market. Liquidity-driven price actions are the most volatile setups and have the highest risk to reward trades. These are usually the best trade set-ups! Now to perfect your mindset with trading, always let your trades hit your stop loss or your take profit (this is extremely underrated, but over time you will build trading discipline, and you will eventually be profitable with the right strategy)
The ideal risk-to-reward ratio per trade should be a minimum of 1:2 with 1:2.5 being optimal. If you risk $100 you should be rewarded with $200-$250. Keep it simple! Do not sell for profits at $150 or sell for a loss of $50, as this will negatively condition your brain to sell for bigger losses or take smaller profits. For 100 trade setups, I challenge you to let either your trades hit your stop loss or your take profit. Risk per trade should be between 0.5% to 2% of your account size. Do this over the next 100 trades with a double-axe account that allows you two chances to pass your evaluation phase with Axe Trader and watch how you transition into a more disciplined and profitable trader. Do not let your emotions execute your trades, stay rational. In the long term, natural selection will play its course in markets, so stay disciplined and motivated to play the long game of trading risk management, a solid trade plan, and a solid trade strategy.
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