Common emotions to avoid in forex trading.

Emotions can get in the way in making wise investment decisions. How often have we decided based on impulse and later on lived to regret it? Yes! In the realm of foreign transactions, emotions can get in the way too! And the rule head over heart, applies likewise.

Our impulses are caused by several psychological factors that urge us to act one way or another. Here are some psychological impulses that can adversely affect a trader's decisionů

1. Greed. People always want to aspire from something better. Contrary to popular belief, a little greediness can actually be a good thing since it motivates us to move further in order to improve our current situation or acquire something we don't have. Yet too much of anything is bad, and of course, greed is certainly of no exception. Many people say that the foreign exchange market is a lot more stable and easy to predict than the stock market. Yet even in a more secure environment, greed can penetrate and obscure clear and rational thinking. Greed can make one stay in the market or hold onto positions too long, even after a considerable gain had already been achieved. An adverse decision which, more often than not, results in disastrous and dire consequences.

2. Fear. In ordinary life, fear is an emotion that stagnates and prevents us from taking risks. Often, it prevents us from doing anything at all. It keeps us glued to a certain spot one which we consider our comfort zone. In forex trading, it will prevent traders form taking risks that should be taken , or cause them to sell existing positions too soon. In other words, it has almost the opposite effect of greed.

3. Pride. We all hate to admit we were wrong. It applies to trading decisions as well. Pride tends to keep a trader in a losing position for too long because of a reluctance to admit that the original trading decision may not have been the right one. But there are times when giving up is the right thing to do. And pride keeps us from seeing that.

The above are just examples of how emotions can keep us from making the right decisions. Thus, we must check our inner motivations and find out the basis of our trading positions. We must take calculated risks, and thus avoid the painful experience of being an 'emotional' trader.