Major Psychological Pitfalls in Forex Trading (Part 3)

In the first 2 parts we enlisted the 4 biggest pitfalls in trading and connected these to the basic human drivers. In this final part, we focus on how to overcome these pitfalls.

The Solution

As you can see greed and fear hand in hand moves the financial markets on the short run, because the players who operate the ‘voting machine’ are driven by these two basic human emotions.

In order to minimize the negative effect of these basic human drivers on trades, a good trading strategy should provide protection against all the above mentioned pitfalls by a proper set of rules that enables the trader to be greedy when it is serving him well and to be fearful when the time is right.

The problem is not with being greedy or being fearful as the market would not move other way, but the problem occurs from the misuse of these emotions. A trader needs to be fearful when entering the market, which has the derived effects of not taking too much risk, and cut losses early on if the market disagrees with him. And a trader needs to be greedy when the market agrees with him to be able to maximize profits.

To help the trader with controlling these emotions and applying them when the time is right, a proper forex system should be put together in a way that it guides the trader and brings up situations where rules allow greed and fear to come into play in the right moment but forbid them when needed.

The Stealth Forex Trading System™ just does that. By giving proper, easy to recognize entry signals based on the conjunction of several important indicators and through easy to follow exit strategies, it ensures that most of the enlisted pitfalls simply do not occur during trading. However, the adequate use of money management and the responsibility of complying with the rules of the Stealth Forex strategies stay with the trader.