When you trade on the forex live market you are going to be faced with a number of different mental traps. It is important that you know what these mental traps are because they will all lead to losses in the long run. When you know what these traps are you can work to avoid them and the losses that they will inevitably bring.
Not Being Able to Take a Loss
A fact of forex live trading is that you will lose money on some of your trades. There are times when the market moves and you have no way of predicting it. At these times you need to accept your losses. However, a common psychological trap is that you are unable to do this. When you fall into this trap you are more likely to make emotional trades and turn to revenge trading. All of these trades will lead you to greater losses and an unending cycle.
The only way to avoid this trap is to accept that there will be losses. If the loss is not related to an unforeseen movement in the market you need to determine what went wrong. When you do this you can protect your trading account from these losses in the future.
Forex Live Anchoring
When you use the term anchoring in relation to forex live trading you refer to the original idea a trader has. This could be about trading in general or about a single trade. The psychological trap is that the trader does not see anything that takes them away from this original idea. This is a very dangerous trap because it often leads to bad trades and a loss of money.
To avoid this trap you need to be open to information that is not in line with your original idea. This is often easier said than done because most people do not like to be wrong. You also have to be open to new sources of information because the ones you are looking at could be cementing this trap.
The Superiority Trap
The superiority trap is something that traders can easily fall into when they have made a profit on a number of trades. When you are profitable you assume that you know what the market is doing and that you know how to trade. While this is correct to a certain extent traders falling into this trap think that they know everything.
To avoid this trap you need to be realistic. If you have made a profit on the market you should not assume that you are successful. You have to keep up to date with all the experts and take what they have to say into account.
Falling into the Confirmation Trap
The confirmation trap is a psychology trap which is closely linked to the anchoring trap. With a confirmation trap you only look at information that confirms what you have found on the market. If you have completed technical analysis which shows that an uptrend is coming, you will only look at corroborating evidence that shows the same. This is a major problem because you can be creating bad trades which could be easily avoided.
To avoid this trap you must ensure that you look at all the information about a trade. This information should be confirming and disproving your idea. When you do this you get a clearer picture of the market and whether your trade will make you money or not.