How a Reliable Automated Trading System Solves the Negatives of Trading Psychology
How this perception can be influenced by emotions and one’s susceptibility to different biases? Research shows about 80 percent of financial traders fail. They lose money, go broke or even retire. It is not that they make numerous mistakes. It is all in the mind. For these reasons, most successful traders always recognize the significance of psychology. Negative emotions have a psychological impact on confidence, creating doubts and confusion. These effects can hurt one’s trading performance. One of the best ways traders can overcome the negatives of Trading Psychology is to use a reliable and tested trading system. The following are some important details to know before using an automatic forex software.
What is automated forex trading?
An automated trading system is a computer-based program that analyzes currency pie charts and other market activities. It helps a trader to determine whether to buy or sell a currency pair at any one time. The software can identify signals, including price trends, financial news and spread discrepancies that can affect the market. The signals create a buy or sell decision when they point in the same direction. To get the most out an automated forex trading system, the trader must teach the software what signals to look for and how to interpret them correctly. An automated trading software helps in the elimination of all the negatives of psychology.
What are the different types of automated forex trading systems?
There are two major types of automated forex trading systems: online or web-based systems and the desktop or client-based systems. Online or web-based forex systems rely on the internet to provide non-stop on the market and prices. Desktop or client-based systems require forex software to be downloaded and installed directly on the computer. Data is stored on the hard disk, but an internet connection is still needed for software upgrades and information updates. Desktop versions are unpopular to many traders since all data are susceptible to computer virus contamination and other security problems. Web-based systems are hosted on secure servers. They are convenient, in the sense that there is no software required, and they are universally compatible with Internet browsers.
What are the different negatives of trading psychology?
Emotions are a trader’s worst enemies on the financial market, and learning how to eliminate their impact on decision making is a tough task that can be achieved through years of experiences. However, with the right automated forex trading system, one can certainly overcome all the negatives of trading psychology. The following are the common negatives of psychology in trading:
- Greed: Greed is a typical human trait, where one has an instinctive desire to do something better and try to get more out of a certain situation. Greed makes traders lose their money since they tend to hold to winning positions for long in attempt to get more out of the market. Additionally, they tend to invest more in a position, simply because the market has moved in their desired direction.
- Fear: Fear often arises after a long series of losses, or having to swallow a loss larger than what you can emotionally absorb. Fear can make traders to miss on opportunities by not joining a position at all or miss on profits by exiting a winning position earlier.
- Pride/ overconfidence: Pride is another major problem most forex traders experience. It is a psychological behavior where traders refuse to identify and accept their mistakes, thus rendering them unable to learn from them and improve. The stubbornness of these traders cause their failure instead of helping them improve what they are doing, they just worsen their performance.
How can automated trading systems eliminate the negatives of psychology in trading?
An automated forex trading system allow a trader to examine carefully their trading style ahead of time and design a system that works best for them. One can tailor their trading to their risk tolerance levels, which are then inputted into their system. By doing so, the role of making pressured decisions on the spot in an ever-changing market is eliminated. Reliable and tested automated forex systems take emotions and stress out of currency trading decisions. Guesswork, fear, greed, and pride are all eliminated from the trading process. All you see is predictable progress and favorable results.
What are some key advantages of using automated forex software?
- Provides for emotionless trading and proper management of multiple accounts
- There is no learning curve, since prior knowledge of financial markets in not needed
- Offers reliable risk management options
- One can participate in a market even though they do not have time to study it
- It allows traders to exploit profitable opportunities 24 hours a day
What factors should one consider when choosing automated forex trading software?
- Needs and Preference: Since automated trading systems vary in performance, speed and programmability, the needs and preferences of one trader, may not be acceptable to another.
- Fees and guarantees: Some companies charge trading commissions and additional fees while using their trading software. Remember that fees and commissions can draw down your profitability, so choose a firm that charges reasonable fees.
- Ease of use: The automated forex trading system one chooses should be easy to use.
These are just some of the essential details to know before buying automated forex trading software. With the right automated forex trading system, one can take the least advantageous elements of trading psychology out the process, and replace it with precise, reliable currency trading instructions. Remember that the currency market is always evolving; the best way to maximize results is to incorporate modern technology in your trading.