This article was first published on Genesis Vision Blog - Medium
Every human being is bound to make mistakes and traders are just regular people in that regard, just with one difference — their errors are easily quantifiable.
Numerous studies have shown that when a trader makes decisions on the market, most of the time we don’t use our cerebral cortex (a part of the brain responsible for rational thought), but rather an area of the brain called the hypothalamus, is actually responsible for our trading actions. Hypothalamus is a part of our brain that regulates emotional responses, and it solves problems in a very caveman “strike or run” way.
One of the emotions that is accountable for most of the trading mistakes happens to be fear. Fear has a significant influence on the range of options that are considered by the brain, whose natural tendency is to ensure survival, minimising the risks.
Another trick that psychology plays with us is the fact that most people, rather than focusing on the long-term gain, always strive to guarantee a short-term profit. Social studies confirm this: 75% of children would prefer to be given one candy today, rather than two candies tomorrow.
By realizing (and more so, understanding) the role of your own psychology during trading on Forex, crypto, or any markets for that matter, you hand yourself the tools to combat fear, which in turn will allow you to restore the primacy of healthy logic and cold calculation, which are necessary for the market during trading.
Own worst enemy
Have you ever had a feeling while you were trading, that you are on top of the world, that your orders are the best orders ever opened and that in a matter of just a few days you will be included in the Forbes lists, and then you wake up the next day, and everything does not look so ...
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Genesis Vision Blog - Medium