I’m sure you have heard that your psychology is the key to trading success.
But what does that actually mean?
How can “knowing yourself” be more important than understanding the market?
The truth is that understanding the market is actually quite easy.
Most people can look at a chart and know where the good places to buy or sell are –Though, the same people are unable to trade.
This is because of three things:
- A lack of clarity. Most people are not crystal clear about what they want from the markets or what they are looking to achieve.
- People worry about losing money.
- People are influenced in their decision making by how much money they have made or lost.
These three things get in the way of truth. Instead of seeing the market for what it is, most traders view it through a foggy lens.
A good trader understands these points.
They spend their time not in a process of constant market analysis, but one of constant “self-analysis”.
The question they are asking is:
“Am I seeing the market for what it truly is, or am I clouded by lack of clarity, fear or greed?”
When they answer this question, they can understand their motivations behind their decisions.
Pure decisions, based on a truth, will always trump emotional ones.
About the Author
Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access). He is the owner of www.fxrenew.com a provider of Forex signals from ex-bank and hedge fund traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.