Psychology of Speculation in the Forex Market – By ASC

Forex speculation is the name of the game in trading. Every trader, at one point or another, has to click ‘buy’ or ‘sell’ and commit to a position based on their analysis even if there is no guarantee of success. Unfortunately for traders, the market can have very different perspectives on the market and this can lead to a moment of serious introspection.

This article seeks to address some difficult questions and explore the following:

  • What is speculation in the foreign exchange market?
  • What happens when everything goes wrong?
  • Ton 4 tips ke speculate lsuch as a ssucceeded trader

What is speculation in the forex market?

Speculation in the foreign exchange market involves yang buying and selling currency with the aim of making a profit. It is called speculation because of the uncertainty involved because no one can say for sure whether the market will go up or down. Traders evaluate the possibility of either scenario before placing a trade.

What happens when everything goes wrong?

After you develop a trading strategy focused on forex speculation and learn the basics of the market – you have a lot of the tools needed to succeed. And when that success doesn’t come, all sorts of questions can spin in your head.

“Am I trading the right strategy?”, “Do I really know what I’m doing?”

This question/doubt is not unique. Most traders have this mindset at one level or another and have learned how to overcome it. Let’s answer these questions directly:

1) Am I Trading the Right Strategy?

Many traders don’t realize this in advance – market conditions change over time. As a currency speculator, you could spend weeks analyzing specific markets that fit your strategy at the time, but this may change and when it does, it seems like nothing is in your favor.

A perfect example of this can be seen when comparing EUR/USD in 2017 to the same currency pair in the first half of 2019.

In 2017, EUR/USD was a strong uptrend for the majority of the year. A retest trend trading strategy will naturally yield interesting results and any reasonable trader will endeavor to implement such a strategy.

EUR/USD 2017 uptrend currency speculation

A very different picture can be seen below when EUR/USD trades sideways for the first six months of 2019, making things difficult for new trend traders. Red 200 -day moving average helps make this happen because it cuts the price many times over and fails to give a clear signal.

Forex speculation in EUR/USD 2019

Traders should take some time to analyze whether the market conditions have changed or not. It is very possible that the trading strategy is good but the market is no longer exhibiting the features that attracted you to it in the first place.

2) Do I Really Know What I’m Doing?

“FAILED: The First Attempt in Learning”Without name

This is a difficult question to answer as this depends on the knowledge and willingness of each trader. Since this question cannot be answered, the next best thing to do is to see what others have done wrong, learn from it, and avoid doing the same. trading errors.

At DailyFX we research over 30 million live IG trades to find out the number one mistake traders make in us Characteristics of a Successful Trader report. Understanding where it goes wrong and making the necessary adjustments is the first step to trading like a professional.

4 Tips to speculate like a successful trader and get back on track

1) Don’t Let Risk Change Your Behavior

The biggest psychological barrier for traders is the perception of loss (and the concept of loss). For traders, the agony of closing a trade and realizing a loss outweighs the excitement of realizing a winning trade of equal magnitude.

Top traders use sound risk management Firstly. Traders can win two -thirds of all their trades and still land blasting accounts without using stop. The natural consequence of this is that the trader allows losing a running position, while taking a profit as soon as the position turns positive. The loss is greater than the winner and this should not happen.

One way to manage your emotions is to execute a trailing stop or move your existing stop manually when the market moves in your favor. This way, traders can relax knowing that they have breakeven and any further movement in your favor is a mere profit.

Currency speculation uses stops

Before placing a trade, know the level of risk you are willing to take and make sure the risk-to-reward ratio is at least 1: 1.

2) Bring a Positive Mind to the Daily Chart

Since you will definitely incur losses in this forex speculation game, it is important to deny those losses rather than change your frame of mind.

Traders will often experience frustration at being stopped and this can be very frustrating. As a result they take shortcuts in their analysis or question their own approach. It never ends well.

The key to maintaining a positive mindset in trading is to view losses in the same way as business owners view expenses; just as the cost of doing business. Because when you’ve learned to lose properly, and after you’ve learned to keep those losses within the scope of the bigger picture – you’ve tackled the biggest aspects trade psychology.

3) Hit the fine balance between fear and greed

Both of these drives can have a huge influence in the way we live our lives; and not just in trade. When trading, both fear and greed can be massively detrimental, as it can obscure your judgment and lead to poor results.

Most human beings will be greedy when they have a losing position; willing to survive if only prices can return to their starting levels. And when in a winning position, most people will start to get scared.

Traders should look to reverse the drive and be greedy when it has been proven right. If scared, you can use a break -even stop to help alleviate concerns that your initial risks are still exposed.

4) Don’t let confidence overwhelm you

After compiling a string of successes, it is already human nature to build confidence around your affairs and this can be a good thing.

But once a trader has entered ‘too confident’ territory, risky habits may sneak into their approach, no more destructive than a willingness to bend their own trading rules just because they feel it will work.

Therefore, traders should always look to achieve a delicate balance between fear or apprehension, and overconfidence.

Further reading to improve your forex trading


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