Trading psychology refers to all the emotions and feelings that a trader might feel while keeping a trading position in the forex market. It can be helpful but it can also become trouble when it becomes too much and overcomes the trader's senses.
Some common psychological effects that are bad for trading are:
- Fear: In which traders keep worrying that the market will turn against them and cause their losses, resulting in not opening any position and missing a lot of trading opportunities.
- Greed: A sense of over-expectation that pushes traders to trade beyond their plan, usually caused by lucky streaks and leads to overtrading.
- Hope: This emotion comes from too much hoping that the market will follow traders' will without realizing that they can't really move the market. It usually leads to entering the market by gut instincts without any reasonable plan.
- Regret: An extreme disappointment over missing opportunities in the market. This usually results in overtrading for the next trades as traders affected by this emotion would not want to miss any opportunity even though they break their own trading rules.