A Guide to profit-making trading currencies
“What do you think makes a good forex trader? Everyone is going to say if a trader is profitable. That is true to an extent. When a trader focuses only on making money from the market, getting into losses is inevitable”.
Being a good forex trader matters a lot in your ability to avoid losses during trading. In Nigeria, there are lots of remarkable forex traders who are known to make steady profits in the markets. That is it! Being able to be consistent on a daily, weekly, and monthly basis.
This article pinpoints avoiding the disposition effect in forex trading for traders in Nigeria. You can call it loss – aversion, getting to that point where you are in a dilemma. But having the right set of skills will help you in overcoming this stage. There is a lot to be learned with disposition in forex trading – as it is extremely important to be profitable while trading. Before getting deep into this subject matter, you need to understand what the disposition effect in forex means.
What is Disposition Effect?
The disposition effect in forex is the tendency of a trader to sell too early and hold on to losses too long believing there would be a turnaround effect.
So many traders in Nigeria go through this situation which makes them lose out on big winnings due to fear and loss of hope. Overcoming this struggle is important to your trading routine, but this can only be done with the right set of skills in averting this potential loss attitude.
But these things don’t just happen – some things cause these effects in your trading pattern. It is very much important to learn about the causes before finding the code on how to avoid the threats to your trading lifestyles.
Causes of Disposition Effect in Forex Trading
The following are what cause disposition effect in forex trading. These causes will give you a preview of what you are dealing with and how to handle them.
- Mental accounting
Just as the name implies. In Nigeria, investors focus too much on the trades instead of focusing on the performance of the trade. When trading, avoid being too conscious of the funds being invested and focus on your performance.
- Self – control
Not having strong self–control while trading can be hazardous to your entire trade. Understandably, you don’t want to lose trades, so you sell quickly and miss out on huge potential returns.
- Regret aversion
Many traders in Nigeria can be held accountable for this. Selling at a loss even when you know it is awkward, but trying to recoup for mistakes being made. This is pretty wide as a lot of feeling bad when closing in on a trade that is supposed to be more profitable.
- Prospect theory
This prospect theory issues that there is more pain in losses than the joy in winnings. This makes traders in Nigeria a double on what to do when they hit a stage of either settling for the little wins or getting ahead in a loss hoping for a reversal.
How to Avoid Disposition Effect
There are several factors to have in mind as a forex trader in Nigeria. One is how to avoid the disposition effect while trading. The following guidelines will give you a detailed flow on how to avoid these struggles.
- Getting past your emotions
Always set your emotions aside when trading and watch your profit ratings go up. The reason behind your disposition is that you are letting your emotions get the best of you.
- Have a plan
You can’t get past anything without a well-detailed plan. Especially in trading, it is important to have a trading plan before starting at the beginning of every trade. Learn to ask yourself certain questions about what you hope to gain with every trade.
- Making use of stop less
The stop loss helps you avoid unnecessary losses beyond what you can handle. Making use of the stop loss allows you to set your trade and monitor what happens during the trade with better mind control.
- Difference between losses and profit
A unique way to also avoid dispositioning in forex is to understand the difference between the losses and the profits which you are being faced with and be able to take a final decision on what is to be done.
Trading is good, trading is rewarding – but having the right skillset to overcome trading struggles is what every forex trader in Nigeria should be after. Learning the ability to control and minimize the risk involved is a true definition of a forex trader. Gain the right knowledge, quit using your emotions and the sky won’t be your limit.