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TRADING PSYCHOLOGY


as those activated when someone is getting high on drugs or having sex. That explains why, when we make money by trading on the market, and when we win a trade, we get this really good feeling and powerful high. Subsequently, we have the desire to extract more money and more pleasure from trading and here is when the real danger of becoming addicted comes in.


When we trade and we win, our brain produces a substance called dopamine which can incite us to trade again to feel the same powerful high that any drug- addict knows very well.


This can lead us to a dangerous behavioral cycles. We start to trade for the emotional rewards and not for the money. The process can also become more addictive because, not only we experience an emotional and physical high when we win in trading, but we also experience the lows when we lose. Therefore if a trader is not mentally trained he will feel emotional pain when he loses, and the greater the amount he is losing, the bigger the pain he will go through.


Rule № 2


You need to be able to control your feelings and not get over-excited about certain aspects of trading like winning or losing. Remember that you will be winning and losing all the time during your trading career, so you need to be able to take these emotions in stride. There are specific exercises you can do to control these feelings.


Our brain is not accustomed to surviving in such an unstable and totally unpredictable environment


4. Time And Effort Relationship


Moreover, the deeply ingrained formula Time + Effort = Reward, which exists in our everyday life, is totally modified on the market. In our western culture, we have learned that there is a proportional relationship between these three elements. For example, a person who wants to get a university degree will have to put a lot of time and efforts, both physically (ie. waking up early in the morning to get the train, or studying late at night) and mentally (spending time learning


and focusing on different subjects), and as a reward, this person will obtain a specific knowledge which will increase the possibilities to find a good job and make a living thanks to a decent salary.


On the market, this formula just doesn’t exist. You can get huge profits with no effort and in no time, just by making the right decision. Te fact that you can use leverage on the market amplifies your possibilities to obtain high rewards, without having to spend time and effort. Some traders aren’t aware and ready for this and can have serious psychological problems getting “too much” profits in “too little” time. Tey tend to consider these profits to be unethical, and therefore a psychological mechanism will trigger to bring profits back to an “ethically correct” level.


FX TRADER MAGAZINE January - March 2019 35


FX


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