In 1923 Edwin Lefevre wrote a book called "The memoirs of a market trader," which was devoted to one of the legends of Wall Street - Jessy Livermore. Lefevre described in simple and easy-to-understand language all the difficulties, including psychological, that a trader faces on a daily basis. History repeats itself again and again. The change and mindset of today's traders has changed drastically since then. Even if market conditions change.
In "The memoirs..." Lefevre gives the example of a fairly well-known forex trader who made a lot of money on Wall Street but ended up breaking his trading strategy. When he opens a short position in the stock of the American company Lake Shore, he "shorts" until the trend becomes bearish. When the trend starts to change direction, traders refuse to take profits or at least to stop orders for fear of losing at least one profit point. The market changes its direction, but the trader does not close the position and has a big loss on a potentially profitable trade.
What if you lose forex
That's what Lefevre wrote about it: "A forex trader's main enemies hide within him. Hope and fear are inseparable from human nature. When the market is against you, you keep thinking every day that today is the last and lose more than if you don't hear your inner voice of hope - a loyal ally and the most important factor in the success of all empire builders and vanguards.
When the market moves in the direction you want, you start to fear that the next day will take all the profits and you will be out of the game prematurely. Fear prevents you from getting as much as you could in a situation like this.
A successful forex trader must struggle against these two deep instincts. He had to change his natural impulses instead.
Instead of hope, he should be afraid, and not afraid - but hope. He should be afraid of the fact that small losses can lead to much higher losses, and hope that small gains will lead to big gains. To play with the stock market in gambling as many ordinary traders do is completely wrong".
How do you feel when you lose while trading forex? Do you hope that you will be able to recoup your losses quickly or do you fear that your losses will result in more significant losses.
Listen to yourself, and you will understand how much influence your psychology has on your decisions.
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