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Confidence in Forex Trading

April 17, 2012 | Comments: 0 | Views: 147

Confidence in Forex trading can be great. There's nothing worse than trading fearfully, as it can prevent you from trading rationally calmly. Forex traders that worry too much tend not to think rationally and are generally not in a relaxed state when looking at their trading platforms. However, you should remember that there is a difference between confidence and overconfidence.

Confidence is one emotion that is important in Forex trading. It is one emotion that is important when it comes to the psychology of Forex trading.

A lack of confidence is bad. Too much confidence is also bad. It's all about finding a balance between a lack of confidence and overconfidence.

When trading too cautiously, you will most likely place tight stops and only take smaller amounts of profit. This can definitely prevent you from actually making any money in the Forex market, because you won't let your profitable trades run. When you lack confidence, you will also find that your investment decisions are not as strong. When you can't think rationally or calmly, you will generally find it difficult to find profitable opportunities.

When you trade over-confidently, you will most likely take more risks and think that you will be able to make lots of money with ease. If you are a good Forex trader and whatever you are doing is working, then don't stop. However, if you've only seen some success in the short run, you should definitely not be overconfident. Short-term success is sometimes just a product of luck, unfortunately. Before you decide to take more risks, you should keep doing what you are doing for a little longer - you will probably find that currency trading isn't as easy as you thought it was after all. Losses are inevitable, so don't go placing large orders just because you have managed to win a few trades. Stay disciplined and consistent. Of course you should embrace your successes, but ensure that you don't get carried away as this can actually be dangerous.

It can be difficult sometimes, especially for beginners, to find a balance between low and high confidence. You just have to try and be confident and realistic at the same time. If you ever feel like you lack confidence, consider decreasing your risk and perhaps go back to studying, so that you will have more knowledge next time round, which could help you to feel more confident. It's difficult to realize it when you are overconfident, but just ensure that you have a good Forex trading plan and that you follow it too whatever your situation may be.

In conclusion, both low and high confidence are undesirable states of mind. Forex traders should ideally find a balance between the two. Ultimately, you should be confident, but also realistic when trading currencies in the currency market. Ensure that you don't start to fear placing orders, but also make sure that you don't start increasing your risk after seeing some short-term success. Really, it isn't too difficult to find a balance between the two; just have a Forex trading plan and stick to it. It's good to make habits early on in your currency trading career.

How Forex Trading Works is a resourceful website that serves to deliver free, online content relating to Forex trading, to anyone and everyone.

Source: EzineArticles
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