5 Trader Psychology Tricks To Make You A Forex Winner

BY TIO Staff

|December 30, 2022

Want to be a Forex winner? Then mastering your trader psychology is the first step!

Not all traders are winners, and it’s surprising how few realize the role their mindset plays in that. It’s hard ‒ perhaps impossible ‒ to have a successful Forex trading career if your trader psychology isn’t right. So, the first thing you have to do is to literally get a hold of yourself!

As a trader, you want to succeed and be a winner. But when things don’t go according to plan, how do you react? Are you able to stay unemotional when trades don’t work out? Or does it trigger an emotional reaction deep inside your subconscious brain that hinders your ability to make sound and rational decisions that could lead to better outcomes if not now then down the line?

Mastering trader psychology is all about managing psychological patterns, values, and beliefs. We all have the ability to reprogram ourselves for potential success. How? Well, read on because we’ve got a bundle of goodies, tips and tricks lined up to help you be the master of your own mind…

Trader Psychology Tricks Outline:

  1. Know Yourself
  2. Manage Your Mindset
  3. Know the Market
  4. Have a Risk Management Plan
  5. Step away

What is Trader Psychology

Trader psychology is the study of how traders think, feel and behave when they trade. Trader psychology can be thought of as the mental side of trading, and it includes such things as risk-taking, confidence levels and decision-making skills.

What’s the Psychology of Forex Trading

Forex trading is a type of asset trading that involves the exchange of one currency for another. Traders in forex markets are always trying to predict which currency will be more valuable in the future and trade accordingly.

Forex traders may be more prone to emotional trading than other instrument traders because the Forex market is so fast paced and sometimes more volatile than, say, position trading in the stock market where you wait it out to see if an asset will pay off in the long run. Forex traders have to be able to handle losing trades, manage their emotions, and get back to business, fast!

Is Forex Trading Psychology Different from Other Trader Psychology?

Forex trading is a fast-paced, high-stress environment. It’s no surprise that forex traders are prone to emotional trading. The psychological effects of trading on the forex markets can include:

  • Trading too much or too little, depending on how much money you have available
  • Getting caught up in the momentum of a winning trade and staying in it too long
  • Attempting to make up for shortfalls by increasing leverage
  • Focusing on short-term gains over long-term strategy
  • Being overly optimistic about your own abilities

How to Master Forex Psychology

So let’s dig into these long awaited tips then to get you on your way to becoming a master of your mindset. Warning: Side effects may include a clearer sense of self awareness, focus, and confidence in your future as a trader.

Trader Psychology Tip 1: Know Yourself

If you want to master the psychology of trading, the first step is to know yourself. In other words, you need to be self-aware. You need to know what triggers you subconsciously to react, behave or take certain actions.

Get to know yourself enough to know when you are wrong, and to admit your mistakes. You need to be able to take a hard look in the mirror and embrace your flaws. This is the first important step to building a trading psychology toolkit that will carry you through the ups and downs of your trading journey and career.

Be self-aware

Self-awareness is the key to mastering trader psychology. You need to be able to understand and identify your own triggers, so you can learn how to avoid them or manage them when they arise. It’s also important to be able to look at your trading and determine whether you’re being rational or emotional with your decisions, which will help you learn what’s working for you and what isn’t.

Know Your Triggers

Now, let’s talk about what exactly triggers are. A trigger is something that makes you want to act on an emotion. For example, if you’re nervous about losing money during a trade, your brain may try to trick you into acting on that fear by selling at a loss or getting out of a trade altogether.

Triggers can be external things like other people’s opinions or news events that are going on in the world. They can also be internal things like emotions or feelings happening inside us, such as excitement or anger.

As traders, we have to be able to recognize these triggers and then make sure they don’t affect our decisions when we’re trading. We also have to learn how to manage our emotions so they don’t affect our trades.

Admit Your Mistakes

Admitting your mistakes is a big one! You need to acknowledge when you made a wrong decision and why it was wrong so that you don’t repeat it again down the road. Being able to recognize when you are making mistakes or making bad decisions in trading is important. The more you practice awareness of your mistakes, the easier it gets to recognize when you are about to go down the wrong path so you can make a turnaround and avoid making similar past mistakes.

Oftentimes traders blame others or external factors for these issues. What they fail to realize is that most of the time it’s not anyone else’s fault but theirs because they haven’t taken the time to reflect on what went wrong in a trade or what they did wrong. Sometimes it’s nobody’s fault, so don’t be too hard on yourself either.

Look in the Mirror

Now, let’s take a look in the mirror. You’re a trader. And that means you’re a badass.

You’ve already taken the first step in mastering your trader psychology by reading this article.

As a beginner trader, you’re about to embark on an incredible journey of learning, discovery, and growth—and that’s no small feat!

So here’s the deal: if you’re a beginner, celebrate yourself for taking this brave new step into learning how to trade. If you’re more advanced? Congratulate yourself for your continued growth as a trader. You’ve come so far already, but there’s still so much more ahead of you!

Trader Psychology Tip 2: Manage Your Mindset

One thing you need to understand is that trading is a game of skill. Winning is not about luck or who has the most money. Apart from having the right tools, trading knowledge and strategy, a person’s mindset plays a big role in their potential trading success. You need to be disciplined and drown out the noise, as well as learn to think like a winner.

Think Like a Trading Champion

What does thinking like a trading champion entails? Well, for one it means that even if you lose, you pull yourself back up and try again. You are not defined by your loss. You are defined by the internal strength that helps you stay sharp, focused and disciplined.

Drown Out the Noise

Manage your mindset by drowning out the noise. There is a lot of information online on how to do this or how to do that with trading. find reliable and trusted sources and don’t overwhelm yourself with advice from too many different people. What may work for one person, may not be what works for you. learn to filter and choose who to listen to.

Have A Birds Eye View of The Market

Even if you are only trading one or two assets or instruments, you will feel like you have a stronger mindset if you keep yourself educated on what is going on across all markets.

Talk to yourself

Manage your trading mindset by talking to yourself. ask yourself questions about what you are experiencing, what emotions you are feeling and what may be going through your mind in terms of what to do about it. When you talk to yourself (in a non-creepy way of course) and you ask yourself questions, it helps you access parts of your brain that help you find answers.

Trader Psychology Tip 3: Know the Market

Knowing the market is a big part of managing your trader psychology. Knowledge is power. the more knowledge you have the more power you have over any emotions and triggers that may arise while you’re trading. Having a broad knowledge about the market can help you manage your psychology

Accept The Market Does What It Wants To Do

Part of knowing the market is knowing that the market is going to do what the market is going to do. The old adage of “you might not be able to control what happens to you, but you can control how you react to it” is a perfect match for this trading psychology tip.

You can’t control what other traders do that may affect your trades. If someone from the other side of the world decides to invest big in a trade that moves the price of your assets in an unfavorable direction for you, you can’t control that. By knowing this, you can accept it, detach yourself from the emotion, and start thinking of what to do next to protect your portfolio from further damage.

Study, Journal, And Strategize

If you want to master your trading psychology, it’s important to understand the market well. To do that, you’ll have to study, journal about your trades, decisions, and thoughts, and strategize. Having a solid strategy and being disciplined with it is all part of knowing and mastering the market!

What should you study to know the Forex market well? There are many resources offered right here on the TIOmarkets website, as well as educational videos on our YouTube channel (check us out). To know the Forex market well you need to learn about the history of currencies, how currency pairs work and how central banks affect currency values. Stay on top of news and financial updates. Learn the mechanics of trades (different order types etc) and study the different kinds of analysis (technical and fundamental) and the tools you need in order to make good decisions in trading.

Find a strategy that works for you. Know that one person’s success story is not necessarily a success story for you. So find the trading style and strategy that fits you.

Practice And Back Test

To master trading psychology when forex trading you need to practice and back test. Practicing on a demo account is a great way to get your feet wet. Back testing your trading strategy is a great way to feel more confident about your trading decisions You can also make adjustments before putting real money into it.

Open a demo account with a trusted broker ‒ we have a great one here at TIOmarkets, FYI ‒ and start practicing your strategy. Once you feel comfortable with your strategy, start applying it to a real account. If you want to feel more confident before making that step, back test, either manually or with specially designed software. For a beginner it is best to back test manually. This way you can train your eyes to see patterns in charts until it becomes almost second nature to you.

Trader Psychology Tip 4: Have a Risk Management Plan

To keep your trader psychology in check, it is important to put a risk management plan in place. It is advisable to keep your day job. Maintain your steady income. Use stop-loss and take-profit orders, know when it’s time to cash out, and avoid rash decisions.

Keep Your Day Job

When you’re first starting out as a trader, it’s important to keep your day job. Even if the end goal is to become a full-time trader, it’s better to keep your day job and use your trading money as a way to supplement your income.

There are several reasons for this:

First, having a day job allows you to build up a safety net of funds so that if things don’t go as planned in trading (and there’s a chance they won’t) you’ll have something to fall back on.

Second, trading can be extremely stressful and having something else that you enjoy doing can help balance out these stresses.

Thirdly, it will give you more time to focus on learning about trading without having to worry about employment issues or other financial concerns that may arise from being off work for long periods of time (which can happen when becoming an expert trader).

Know When To Cash Out

Part of managing your trading psychology is knowing when it’s time to bow out.

How do you know, though, when it’s time to exit a trade? It might seem like a simple question, but it’s not. In fact, there are many factors that go into determining whether or not it’s time to walk away from a trade.

The first thing you need to do is see if the market is moving in your favor (or against it). If the market is moving in your favor, then you need to consider other factors like:

  • How long have you been holding this position?
  • Is there any reason why this position should be closed right now?

If the market is not moving in your favor then consider cashing out if:

  • Your position has been losing money for several days in a row and there’s no sign that it will turn around any time soon
  • The market seems to be moving against you in an unusual way
  • Your emotions about the market have started running away from you, if you’re feeling anxious or angry or depressed

Use Stop-Loss And Take-Profit Orders

Stop-loss and take-profit orders can keep you from losing more than you are comfortable with losing and taking your remaining profits before they drop any further.

For example, if you are trading a currency that has fallen more than 5% in the past 10 minutes, it’s probably not a good time to buy. Your stop-loss order will limit your losses if the stock takes another dive. And if it doesn’t crash, your take-profit order will ensure that you don’t have to wait hours for the stock to go up enough for you to sell at your desired price.

This will ensure that you stay calm and trust that your trades won’t go out of control, hence keeping your sanity intact.

Avoid being Rash

No, we’re not talking about the kind of rash you may catch from a public lavatory. We’re talking about making rash, or hasty, trading decisions that could cause your cash flow to go down the toilet. It may, however, be wise to avoid both.

The best way to avoid hasty trading decisions is by following your plan and keeping your emotions in check. A good rule of thumb is to only trade when you feel calm and collected ‒ not bored or anxious.

Trader Psychology Tip 5: Step Away

To have healthy trader psychology you need to occasionally step away from trading. You need to take short, and some long, breaks; zoom out from the forex trading bubble, and well, not to sound rude but, get a life!

Zoom Out

It’s important to zoom out from your day-to-day trading. Have a look at the bigger and overall picture of your trades. This makes it easier to see what is going on with your strategy, and where you might be going wrong. It also helps you see how your trades are affecting one another, and whether or not there is any overlap between them. Sometimes in order to zoom out efficiently you need to step away and take a short break.

Take Breaks

It’s important to take breaks when you’re trading forex because it helps you avoid burnout, which can lead to poor decisions. Taking a break can also help you keep a positive outlook. This is vital when you’re making financial decisions that can impact your future.

If you’re in a position for too long, or if you’re stressed out about a trade, it can lead to bad decisions that hurt your performance.

Get a life

Do we need to explain this? What’s the point of making money if you’re not taking the time to enjoy the fruit of your labor? Do yourself a favor and enjoy some time away from your computer with people you care about. Go out, experience, and talk about things other than Forex trading.

Something happens to the human brain when it takes breaks and focuses on things outside of work and trading. When you least expect it, creative ideas, solutions, and alternative strategies pop up and you return to your trading energized.

Is Your Trading Psychology Ready?

If this article was helpful in making you feel equipped and ready to tackle some serious trading, then let’s go! Check out our different trading instruments at TIOmarkets. And if you haven’t opened an account yet, well, what are you waiting for? Sign up and let’s get you started on building your trading career.

Risk disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Never deposit more than you are prepared to lose. Professional client’s losses can exceed their deposit. Please see our risk warning policy and seek independent professional advice if you do not fully understand. This information is not directed or intended for distribution to or use by residents of certain countries/jurisdictions including, but not limited to, USA & OFAC. The Company holds the right to alter the aforementioned list of countries at its own discretion.

Join us on social media

TIO Staff

Behind every blog post lies the combined experience of the people working at TIOmarkets. We are a team of dedicated industry professionals and financial markets enthusiasts committed to providing you with trading education and financial markets commentary. Our goal is to help empower you with the knowledge you need to trade in the markets effectively.

24/7 Live Chat

Trade responsibly: CFDs are complex instruments and come with a high risk of losing all your invested capital due to leverage.