Some Common Emotions may Lead to Costly Mistakes in Trading Forex

A number of common emotions may arise for forex traders that can lead to costly mistakes if the trader fails to maintain a disciplined trading mindset.

Furthermore, when a trader's discipline has been compromised, and the trader has totally disregarded their own trading plan and succumbed to their emotional reaction, this tends to be the time when trading blowouts most commonly occur.

Some of the emotions that arise when trading that can be counterproductive to a trader's overall success are covered in further detail in the sections below.

Fear is by far the most ubiquitous of market emotions since just about everyone participating in the market experiences the fear of losing money at one time or another. That particular fear, in and of itself, will often drive the market.

Basically, this fear of loss makes up a chief component of the forex market's mass psychology, and it can lead to major market panics as people scramble to get out of positions at almost any price.

Nevertheless, with a solid trading plan, and after optimum market conditions are met, a disciplined forex trader generally has little reason to fear.

Like fear, the emotion of greed is common throughout the forex market, and it basically is the excessive desire for more than you need.

In many cases, greed can manifest in the common trading errors of overtrading and running winning trades into losers.

Most people do not have any idea of how greedy they really are until after they start trading. Having a clear profit taking component of your trading plan can help overcome this emotional obstacle to success.

Hope can be one of the most damaging market emotions to a forex trader's success because hope can coddle a forex trader into holding onto a losing position in the hopes that the market will come back.

The market has already proven the trader wrong, but hope makes them stick with the losing trade, often leading to disastrous results for their trading portfolio.

In fact, the hopeful trader would be far more reasonable in fearing losing more money on a losing trade.

Nevertheless, hope can be used constructively by traders when they hope to make more money on a winning trade and therefore let their profits run on.

The emotion of excitement can often arise after a trader has made a winning trade or when the market moves sharply when a trader has a position causing a burst of adrenalin.

At this point, the trader needs to remember in the heat of that excited moment, that their success in trading over the long run will be determined by how disciplined they are in following their trading plan.

Elation will generally arise when the trader has made an impressive unrealized profit on a position. The boost to their confidence may lead them to think they can do no wrong, and that can be when the problems start.

Not only does the elated trader need to take their profits out of the market by liquidating the trade and realizing their profit, but they also need to stick to their trade plan in doing so.

Nevertheless, the elated trader may throw caution to the wind and disregard the profit taking portion of their trading plan. This can even have the unfortunate result of them frittering away the handsome profit they had originally seen on the trade.

Remember, you cannot take unrealized profits to the bank. Realizing profits in a disciplined way is an essential part of trading successfully.