One needs to learn a lot of things and gain profound information in order to become a successful trader. Forex trading is lucrative, but, if you are not trading wisely, you may lose your money. Thus, its vital that you trade wisely, learn from your feedbacks and choose the right platform to trade. For instance, ETX Capital , which offers the traders an opportunity to trade commodities, indices and forex in an efficient way.
A feedback loop is a sort of mental construct which transitions gradually from the conscious action into the person’s subconscious behavioural response. So, when the feedback loop is positive, the positive actions lead to the positive results which re-enforce the positive actions, again leading to more positive results.
On the flip side, the negative feedback loop, leads to the negative results which re-enforce the negative actions, again leading to more negative results. For example, if you lose money due to a hasty decision of yours, the value of your account will become little lower after you lost money. It will make you question your abilities. Consequently, in your attempt to make your lost money back, you are likely to make another risky decision which may again result in losing money. This way, the negative loop starts.
Why is Feedback Loop Vital For Forex Trading?
When it comes to trading, many traders are aware of what they are required to do on the rational level. But, many engage in impulsive actions when pressure to a certain extent is applied. This implies that, a trader may take an action based on an ingrained habit pattern, or conditional response instead of adhering to the required rational through the process.
A great illustration of the rational approach in conflict with the trader’s subconscious pattern is when the trader prepares the stop loss levels in the event where the market should go against his/her trade. But, when the market actually trades down, the trader impulsively moves the stops hoping that the market will turn around again. Thus, trader instead of accepting his loss, changes his plan.
How to Build a Positive Feedback Loop?
A positive feedback loop can certainly motivate a trader to trade smartly and wisely while achieving his/ her objectives in a great manner. The best way to initiate building a positive feedback loop is to start with a particular trading methodology while measuring the expectancy of methodology before actually implementing it for trading the real money.
This methodology can be any way to trade, such as buying or selling a breakout, buying at the support level or selling at the resistance level. These actions can be triggered by the traders by watching volume and price levels, and by intelligently responding to the signals generated by an array of mathematical indicators.
Significance of Confidence
Confidence is one’s ability to design a trading plan and then executing it as per plan, while not getting pressurised by the conditions. Pressure may result in impulsive reactions and actions. Thus, be a confident trader if you want to make profits.