There can be no dispute that Forex trading is increasing in popularity in all parts of the world. The easy manner in which a common man can start investing his money in foreign currencies (over the internet) has made it very popular. You can sit in the comfort of your home or office at any time of the day or night and do Forex trading. This fact has led millions of people to choose this platform as their mode of investment. Forex trading has very high income potential, as one can hope to start trading with as little as $100 and hope to book a profit of $10000. This is due to the fact that currency trading (unlike other forms of trading) allows for high leverage so enjoys high risk and high returns.
Despite the technology surrounding currency trading improving, nearly 95% of the traders lose money consistently and only a handful of investors are actually able to earn profits. This is because of the inability of the investors to have control over their emotions. Known as the psychology of trading, the emotions of fear, hope and greed dictate the decision making power of most investors and results in disaster if the investor is unable to control his emotions when trading. Only the smart and mature traders, who are able to control their emotions, are able to make money from currency markets.
If fear is your dominant emotion, you will be inclined to close a trade even before you reach the stop loss mark. This implies that you are never able to earn more potential upside to a trade. This is because you are scared of losing and remain fearful all the time. Hopeful investors continue to stay in a trade, even when it has turned bad or worse thereby losing more money than they should. These investors believe that the market will swing as per their expectations and continue to stay in the trade, even when all indicators have gone against their decision. The third and the biggest enemy of traders in Forex trading is greed. If you are greedy, you will not close a trade and book your profit, as you will stick anticipating a bigger profit of perhaps 10 more pips and may ultimately suffer a larger loss than expected.
Develop a pricing strategy of entering and leaving the market and stick to your plan no matter whether you think you could lose more or profit more, and over time you will be able to keep your emotions in check when trading. You also need to show a lot of patience to succeed in the Forex market. Soros one of the world famous currency traders once kept a trade position for two years and ultimately his view was vindicated when the actual currency fluctuations moved in line with his macro economic view of the relevant currencies.