The foreign exchange (forex) market is a world of its own, and it can be a daunting place for even the most experienced traders. There are numerous factors that drive the market such as fundamentals, news and rumors, and market psychology. In this article, we will look at the psychology of trading expectations related to the forex market, and how it can influence your success in the markets. The Psychology of Trading Expectations Review
Trading on markets such as the stock exchange, currency exchange or commodities can be intimidating, and is, at times, very unpredictable. To be successful, a trader needs to understand the psychology behind trading expectations and strategies. In this review, we will explore what makes a successful trading plan and how the mind can help or hinder that success.
The Principle of Expectations
The principle of expectations is key to the success of a trading plan. Traders must accept that the market cannot be predicted, and that values may unexpectedly go up or down. Having an open-minded approach to trading, and the ability to adjust to the realities of the market, is vital. When trading, it is important to understand and review both your goals and expectations, as this will define the choices you make. Successful traders typically have a desire to be the person in charge. It is important that a successful trader is able to take responsibility for any losses or gains, and have the ability to react swiftly when the market shifts.
The Role of Emotion
It is essential for traders to be aware of the potential influences of emotion on their trading strategy and decisions. Fear and greed, in particular, can be particularly damaging to a trading plan. Fearful traders may hesitate on making decisions that could potential bring rewards, while greedy traders may disregard analysis in pursuit of a high reward. Successful trading relies on a trader exercising discipline and staying focused, rather than allowing emotion to dictate decisions.
The ‘Buy Low, Sell High’ Strategy
The ‘Buy Low, Sell High’ strategy is one of the most commonly used and successful strategies used in trading. Professional traders typically rotate between stocks as the market and its values change. Successful traders have the ability to identify and track stocks that are undervalued or high in demand, or that look promising in the long-term. This knowledge allows them to pick stocks that are likely to increase in value and when this does happen, they then have the knowledge and confidence to time the sale of that stock, so that the profits are maximized.
Successful trading requires knowledge, self-acceptance and discipline. Trading expectations are formed by experience, analytical skills, and the ability to remain at the center even when faced with market volatility. The ability to remain focused and act with confidence, taking responsibility for losses or gains, allows a trader to remain one step ahead of the market. By using the ‘Buy Low, Sell High’ strategy, a successful trader can maximize the small gains made from stock changes and aim for long-term financial success.