Most aspiring Forex traders unfortunately do not ever achieve the success they desire when starting out. There are a number of psychological errors at work here that contribute to failure in the forex market. This article will focus on one of the primary psychological errors that hold traders back from achieving their desired results; over-complicating their forex analysis and strategy. It is extremely easy for forex traders to fall into the trap of thinking that their method needs to be technically difficult to understand or that they need to do extensive analysis in order to consistently profit. On the contrary, in reality the emphasis placed on trading methods and trading systems is way out of proportion to the relevance of the topic towards long term trading success. A simple forex trading strategy designed around a clean price chart is all you need, technically speaking, to build a trading method that allows you to profit consistently.
Do your charts look like abstract modern art?
It is not uncommon for aspiring Forex traders to start out with a simple trading method but over time add indicators and other analysis tools to it, before long it becomes a mess of confusion that when applied to your trading screen can literally take on the appearance of a piece of abstract modern art. It is crucial that any aspiring Forex trader understand the psychological origins and implications of using overly complicated trading techniques. The natural tendency of people who do not make very much money to assume that people who do make a lot of money are employing some super complicated technical secret that leads to riches is at work here. It is human nature in our modern day capitalistic society to assume that making a lot of money from relatively little work is simply not possible, which is generally true out side of the world of financial speculation. Therefore, when applied to the world of Forex trading, this tendency drives traders to read every economic release and try to analyze its market implications, as well as place numerous lagging indicators on their price action charts. As those of us who have traded for any period of time will attest to, more is not often better in the trading world.
Over-complicating your forex analysis and strategy is one of the first psychologically induced problems that traders will encounter. Unfortunately in the world of trading one psychological mess up usually leads to another and once the ball gets rolling it is only after losing more money than you care to remember that you actually realize you are doing something wrong. So the remedy to this problem is to just accept the fact that it is almost always better to employ a simple forex trading method that makes use out of a clean price action chart than to spend hours combining different indicators and trying to understand their mathematical foundations or trying to program expert advisors and the like. The cold hard truth about forex trading is that there is no magical system or formula that will allow you to make insane profits from a tiny amount of money; it is just an inherently flawed concept to believe that. There are however simple forex trading strategies that can reduce the emotional implications of trading and allow you to steadily make consistent profits over time.
Why trade with price action?
The most straight forward and simple yet effective way to trade Forex is by using price action analysis. Forex trading with price action analysis is the best way to get started out on the right foot; so that you do not jump start an avalanche of emotional miscues. Take a price chart and remove everything on it; indicators, volume, everything but the price bars, candlesticks are fine. Now you have a clean price action chart in front of you, price action is the core data of any market; it is all that should and does matter to a Forex trader. When aspiring Forex traders apply lagging price indicators to their charts they really are just clouding over the important information, an indicator that visually represents past price movement is not going to tell you anything that you can’t already see from knowing how to analyze price action. Clean price action charts are the only analytical tool you need to employ in your forex trading plan.
The main reason why we only need a clean price action chart to successfully navigate the forex market is due to the fact that trading success in forex or any market is almost entirely relent upon an individual’s level of discipline and emotional stability. The only thing that complicated indicator based trading strategies end up doing for traders is make it more difficult to stay disciplined and emotionally stable. So, since trading success is mainly dependent on discipline and mind-set this rules out the emphasis on method , it only makes sense to trade forex using a simple trading technique like price action analysis so that we can use our trading method to help maintain discipline and emotional reaction.
Trading requires a different skill set than other professions
When we trade using a simple Forex trading strategy like price action analysis we open ourselves up to the possibility of mental clarity on market movement. When we see price movement clearly and not covered up by colorful lines and indicators we greatly increase the odds of arriving at our desired destination of long-term Forex profitability. One of the biggest obstacles any Forex trader will have to overcome is the obstacle of their own mind. Our minds are naturally wired to work against us when it comes to Forex trading. Most of the traits that lead to success in other professions simply do not apply to the world of Forex trading. Take a doctor for example, a successful practicing doctor my decide to play his or her hand in the Forex market because they’ve heard you can make a lot of money relatively quickly from trading and assume since they made it through medical school they should have no problem learning to trade. The problem with this scenario is that the habits learned from medical school; intense studying, over-analyzing studying material, and the overall more-is-better approach that equals success in school and at most jobs, does not equal success in the Forex market and will generally be detrimental to progress.
Discipline and conscious control over emotional state are the two factors that determine forex winners from losers. Emotions help us in most other professions but when it comes to trading success they are our worst enemy, in other words, we are our own worst enemy while trying to succeed at forex trading. Trading a simple forex method such as price action analysis is the very first step that any aspiring trader should take if they truly want to excel in the utlra-competitive Forex arena. Clean up your price charts and start using price action to trade Forex, it is the most logical first step towards achieving your goals as a trader.