The Traders Psychology and the Common Traders Mistakes | FXlinked

The Traders Psychology and the Common Traders Mistakes

The Forex market is an ever-changing entity that keeps morphing and changing every day. Starting with the 1970’s when the United States dropped the gold standard and allowed the dollar to free-float, the interbank market became the favourite place for speculation.

The Internet allowed retail traders to start trading the largest market in the world. Trading Forex these days means buying or selling a currency pair with the interest of making a profit.

Besides technical and fundamental analysis that shape every trading decision, money management is elementary for any Forex education program. And, at its very core, sits the market psychology.

Forex Psychology – How to Build the Right Mind Setup when Trading Forex

A complete Forex glossary will list Forex psychology as mandatory to master for successful speculation. It is no wonder, as often the trader’s ego is the worse enemy in front of trading success.

Because robots and trading algorithms dominate today’s trading, the market moves incredibly fast. To have an idea, imagine that the HFT (High-Frequency Trading) industry is responsible for almost the entire trading volume in a regular trading day.

A quant robot executes thousands of orders every second, making it impossible for human traders to compete at such a level. Nevertheless, even robots have a human component: they respect the instructions set by their programmers.

Hence, basic human feelings and emotions do appear in the Forex market too. But because of the fast pace of the market moves, the retail trader needs to make quick decisions, and this ends up in many errors.

Common Mistakes Traders Make

One of the biggest mistakes comes from a human trait: greed. Traders come to the market with the wrong mindset: to make as much money as possible and as quick as possible.

Therefore, the focus sits on the potential gains, not with the risk.

Every trader would say that they knew the risk before starting trading, and this is why they focus on the reward. This is, however, only half true.

When focusing on the profit to make, most traders over-leverage. It means that they open multiple positions in the same direction and currency pair, doubling and tripling down on a trade.

The slightest market move makes the equity going to zero and the trader to receive the margin call. A Forex broker is not responsible for the poor money management in the trading account; this is entirely the trader’s responsibility.

Besides over-leveraging an account due to greed, trading too small also is detrimental. Many traders book small profits when the market moves in their favour, but allow the positions to swing to huge losses if the trade goes against them.

This is called the inability to pull the trigger, not being able to admit what the trading game is: a sum of losing and winning trades. What matters is for the winning trades to exceed the losing ones, both in terms of number and size of trades.


Understanding market psychology is a process that starts with learning the Forex glossary. Or, the jargon.

Next, traders move into basic and advanced technical and fundamental analysis concepts. They learn the rules of the game, and advantages and disadvantages of every approach.

Finally, only when integrating the trading decision with robust money management systems, the results finally appear. This happens in time, with patience and perseverance, at the end of hard work and discipline.

Just like in the case of any other regular job one may think of.

ArabicBengaliChinese (Simplified)DutchEnglishFrenchGermanHindiIndonesianItalianJapanesePortugueseRussianSpanishTurkishVietnamese