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TRADING PSYCHOLOGY


FX


individual mental processes about the future value (expectations) of a currency or a stock, which forms a collective mental reality that defines prices.


In other words the current price of a currency is determined by matching the demand for this currency vs. the offer. As the demand and the offer are mostly (if not entirely) based on the expectations of the future, then the above definition better applies .


Let’s see what are the main characteristics of the market.


In trading what matters is not what you know you should do but what you actually do


one point in time the market changes going into a range, but you keep trading breakouts. You will need to stop and be able to adapt your trading style, switching to another trading style. If you keep doing the same style over and over again you will never be successful in the long term, unless you are a long term investor and therefore not really a trader.


You may be great at pattern recognition, but you don’t enter a trade when you see one. You may be perfect in both, but then you may lack the knowledge when to exit a position.


Tat’s why it is very important to be able to dominate and continuously improve the three skills that I have just


mentioned: 1.Have a system 2.Know when to execute the trade (both at entry and exit levels) 3.Remain focused and objective.


It is very tough at times to adhere to your strategy or system, so one needs to train his skills very hard in order to achieve automatic execution of what should be done. But let’s see now how you can improve your skills in each level of the macro-areas of trading, and see real improvements in your performance.


The Market What is the market? The market is the sum of billions of


1. Unstructured And Constantly Moving


Being a collective mental reality, and given the fact that expectations change constantly, the market is always moving, changing, virtually without any structure, and offers an unlimited potential for profits and losses. You can never predict if some market news might come out and drive the market in a completely different direction from what you had expected.


Traders often underestimate this fundamental characteristic of the market. It means that interacting with such as collective mental reality will put individuals’ decisional system under constant pressure. You will have to make decisions about the market direction, the amount to invest, the length of the trade, the amount of profit and loss, etc., but you should keep in mind that


FX TRADER MAGAZINE January - March 2019 33


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