Foremost within this realm of trading psychology is the concept of discipline, greed and fear are the two most dangerous emotions to a trader. Discipline is the remedy for these destructive emotions.
Discipline is the remedy for these destructive emotions. This includes

- Refrain from overtrading
- Act according to a structured trading plan
- Cut losses and let profits run
- Follow religiously a trading system with a proven positive expectancy
- Trade without succumbing to the destructive emotions of greed and fear
- Avoid chasing a runaway market
- Use stop losses and/or trailing stops
- Stay out of a trade if there is no valid reason to be in that trade

Trading emotionally is one of the easiest ways to be unprofitable in forex. Of course, as humans we could never he devoid of emotion, nor would we ever want to be. But as traders, it is most certainly in our interests to use discipline to overpower many of the negative effects of the emotional trading.

There are many examples of emotional trading that both amateur traders and experienced traders alike succumb to on frequent occasions. For one many traders fall in the trap of trading aggressively or even angrily, after either a string of losses or one particularly devastating loss. This is often caused, by a desire to get back at the market with a vengeance. The trader’s underlying sentiment is that the market is the adversary, and that aggressive trading can somehow make back the lost equity, teaching the market a lesson in. the process. Clearly, this is irrational behavior that invariably leads to even further devastation of the trading account. Discipline to accept losses gracefully and co continue adhering to the trading plan is the primary weapon against falling into this kind of a psychological trap.

A related trap that is found often in foreign exchange trading occurs when traders experience a winning streak and begin believing that they have mastered the market. Oftentimes, these traders will start thinking that they are unstoppable and that the principles of prudent trading somehow do not apply to them. Greed and recklessness then enter the picture. When this occurs, prior winnings generally turn into subsequent losses, and these traders then become compelled to play catch-up by attempting to make back the winnings. This results in a vicious cycle that eats away quickly at any account, if trading discipline is not reintroduced before it becomes too late.

Another example of emotional trading occurs when traders are alerted to a runaway price move after a large portion of die move has already occurred. The emotion that surfaces is one of fear—fe.ir of missing out on the trade of the decade.

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