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How to Build a Winning Forex Mindset

How to Build a Winning Forex Mindset

*OspreyFX would like to state that traders should research extensively before following any information given hereby. Any assumptions made in this article are provided solely for entertainment purposes and not for traders to guide or alter their positions. Please read our Terms & Conditions and Risk Disclosure for more information.

As a trader, it is very important to stay sharp and abreast of the latest news and happenings in the field. However, knowledge and practice alone are not enough to set you up for a profitable Forex trading career. Traders often overlook the necessity to develop a successful Forex trading mindset. Without this weapon in your arsenal, trading might feel like being constantly at the mercy of extreme emotions. You may have already experienced this and it possibly leaves you wondering if trading will ever be as profitable as you had imagined. The reality is that many people are unaware of the fact that they are trading with a mindset inhibiting them from true achievement. While being successful is the result of maintaining trading habits and fostering the right psychological environment. That’s why this article goes over the main steps that will enable you to create a winning Forex mindset.

Three Fundamental Actions

Essentially, the mindset is a product of three main points that rewire the way you think and react when you trade.

  1. Neuro-physiological wiring
  2. Level of mindfulness
  3. Psychological conditioning

Many traders believe it is the system that holds them back, yet all traders follow the same strategies and techniques. The difference is in their behavior. This means that if you adjust your own mindset, you could start having a more positive trading performance.

Work on your neuro-physiological wiring

Brain and mind are integrated and together they impact your experience as a trader. Thoughts and feelings can have significant effects on your mindset. Because there is no special section in the brain dedicated to trading, everything about your past conditioning will determine your actions, in daily life like in Forex trading. The upside is that the mind is neuroplastic and may be re-wired and trained. The best ways to change your neural programming is to do brain exercises, have a healthy lifestyle and diet, and using Emotional Repolarization Techniques (ERP).

If you haven’t yet taught your central nervous system to relax, the time is now. Take a few moments daily to breathe slowly and deeply. Indeed, breathing exercises, yoga, or meditation can teach your brain to regulate its activity and control extreme emotions. Doing so regularly will remove factors such as fear, irrational decisions, and ego from your trading activities.

It can be helpful to work with a mentor and trade with more awareness of the physiological parameters that have an impact on your decision-making process. The direct experience of the markets will help you move forward and discover what works for you. In addition, keeping a trading diary will give you more insight into the little things that often go unnoticed.

Improve your mindfulness

Basically, your mindfulness is the degree of awareness and attention you have to both the inside and outside worlds. Being mindful can be considered a critical skill in trading. Commonly, your brain learns primarily from what you focus on at the moment.

Therefore, the more mindful and aware you are of this process, the better you can adjust to take in helpful information and avoid useless ones. This is the re-conditioning procedure that will enhance your trading mindset. And this is very different from the technical knowledge of trading such as identifying price action patterns or risk management. The kind of wisdom needed for successful trading comes from simple yet essential steps:

  1. Recognize information that hurts your trading behavior as well as positive decisions
  2. Knowing your weaknesses and strengths you can let go of the negative habits that harm your trading
  3. Continue to strengthen the skills, decisions, and thoughts that support your performance

How to Build a Winning Forex Mindset

Steps to psychological conditioning

There are four basic steps you can follow to kickstart your psychological rewiring.

1. Moderate your expectations

A healthy Forex mindset entails having realistic expectations about the results of your trading. This means, don’t quit your 9 to 5 hoping to become a millionaire within 3 months from live trading with $2,000. The sooner you realize that efficient trading requires a continuous effort, the quicker you will adjust your approach and emotions. That’s why the very first step to trading wisely is accepting the reality of your finances and understand there is a learning curve as well as potential losses. To make this easier, apply these tips:

  • Always trade only with capital you are willing to lose. Don’t risk the money you need for daily living expenses.
  • Before every trade, ask yourself if you will be able to sleep at night in case you lose the money.
  • Appreciate that every trade is independent of the previous one and not every trade can be a win.
  • Be emotionally detached from your trades, just like you would for regular tasks in a job. Losing does not mean you are not fit for trading.
2. Be still, be patient

Typically, we know that things that come easy and fast can also be lost quickly. The same concept applies to trading gains. Reaching for quick and high gains necessarily entails taking bigger risks, therefore accepting the potential for even bigger losses. With this in mind, securing long-term success means you should have consistent gains, even if they are smaller. Thus, patience and moderation are key principles to abide by.

3. Consider your approach to the markets

Traders have several tools available to support their strategies, such as a trading journal and a business trading plan. The better you plan, the more you increase your chances of making money in the long term. The reason for that is that planning and sticking to pre-set objectives and stop-losses removes the emotion from the process. There is a strategy in place and you are following it without leaving space for anxiety and ego.

4. Know your strengths

Confidence is the secret ingredient keeping all your efforts for mindful trading together. If you are not sure what your personal trading edge is, avoid live trading altogether. You are not going to develop the right mindset if you start trading without confidence. Trading requires a calm and calculated approach, not a hit-and-run act, and hope for the best. Price action trading is a simple way that will take your trading experience to the next level.

In Summary

Your trading mindset plays a determining role in the level of success you reach. The degree of awareness and relaxation you manage to achieve will allow you to ignore the emotions and break the habits that hinder your trading success. Never dismiss the power of a healthy lifestyle and diet. The most effective practices to build awareness and change your mindset are yoga and meditation. Evidently, any activity that helps sharpen your brain and mind will enable you to focus on the beneficial and profitable things for your trading.

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