It is important to actively monitor your portfolio in case of changes in the financial market. But every time you see changes in the movement of the market that don’t along with your plan, you might feel emotional and behavioral impulses kick in. Emotions like fear and greed are very common when trading. However, this doesn’t mean that you will just let these emotions ruin your trades. Knowing more about the movement of the market will help you keep these emotions at bay. Check out these frequently asked questions about Forex and market psychology.

Why is it important to control your emotions when trading Forex?

Many traders become emotional whenever they encounter drastic changes in the market. Whether it’s joy and excitement or greed and fear, these emotions could hurt your trades negatively. If you get too excited after a big win, you tend to become overconfident with your trades. Overconfidence could lead to your doom. If greed and fear take over you, your trading decisions will focus on how to make more profits even if you overtrade and get out of your trading plan. Remember that self-control and discipline are necessary traits to achieve long-term profitability in trading.

Is it possible to measure a trader’s fear or greed?

The market has several sentimental indicators that you can look up to. Emotions like fear or greed will ruin your trading plan as it influences your mind to do trades that won’t contribute to positive outcomes for your account. There is a tool being used in the market called the Vix index that measures the level of greed or fear of traders. Another tool is the CNNMoney Fear and Greed Index which is a very powerful tool for measuring daily, weekly, or even monthly and yearly changes in a trader’s emotions.

What are the trading strategies to maintain emotions in check?

Humans can be full of emotions. Although these emotions are normal, you can let them ruin your trades and your trading goals. The best strategy that you can use to maintain emotions at bay is to use a trading plan. There are a lot of things that make up a trading plan and one of these is a risk management strategy. Using stop loss and take profit will limit risks and losses in your account. Once you have a trading plan, you have to make sure that you stick to it. There may be times when you feel like your trading plan isn’t working according to your expectations. But as long as you have tested it a couple of times through a demo account, you are sure to reap the profits you want at the end of the day.

Takeaway

Trading without getting your emotions involved is easier said than done. However, there are several considerations that you need to bear in mind. You must never be greedy to acquire more profits when you know that it is out of your plan and you must not fear the risks. After all, the more risk you take, the more profit you can possibly have, of course with the use of the right Forex tools and strategy.