What Motivates a Forex Trade?
Why Does a Forex Trader Stray from the Plan?
While it’s in every Forex trader’s best interest to develop a trading strategy and to create a plan, the reality is that very few traders actually stick to the plan they create. This is because Forex trades are often motivated in other ways.
Reason and Logic
When Forex traders have a plan but are hesitant to follow it, one of the primary reasons is that they’re looking at a particular currency pair and something triggers them a bit. Rather than sticking to their initial plans, these Forex traders take a closer look at the patterns and recognize something that they’ve seen before. Then, they make a conscious effort to take some more time to see what happens. Other traders find themselves taking a closer look at the calculations they initially made and recognize that there’s something a little bit off; they wait until they have recalculated before taking action.
Intuition
There are a number of individuals who have a plan for their Forex trades who stop short because something “just doesn’t feel right.” In some cases, they think that there’s about to be a major change in the trend or that, despite the fact that they hadn’t made the plan to trade a certain currency pair something in them tells them to buy. Sometimes trades influenced by intuition bring huge rewards; other times they don’t.
Memory
When Forex traders stray from the plan because of a past experience, memory is at play. If the last time they saw a pattern the investment quickly soured or they remember that the strategy they’re using hasn’t worked in the past, the triggered memory can stop the trader from taking action.
Emotional Triggers and Responses
Say you’ve been trading on the foreign exchange for a while and you’ve had a few losses in a row; say that after those losses you want some time off to collect your thoughts. That’s an emotional response in the same way that, when a trade seems to be going really well a trader doubles up in an effort to make more.
Ultimately, memory, intuition, logic and emotion all stand in the way of becoming a disciplined Forex investor. A disciplined investor recognizes that a consistent plan is essential, and knows that the plan also needs to be followed consistently. The reason why some traders are successful while others are not is simple: the most successful Forex trades are motivated by a plan and strategy that are well thought out and practiced with discipline.
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