Besides all of the fundamental and technical factors a trader must keep track of
in order to be successful, there is another area which is often overlooked –themselves.

Every trade you enter refl ects a personal judgment you are making. Recent research shows that particularly in forex trading a great deal of psychology is involved. Some of the factors that enter into a decision to trade are rational factors resulting from a great deal of analysis. Personal attitudes about risk, reward, and self-esteem are also important.

What is the purpose of the foreign exchange market, or any market for that matter? It seems like a simple question with a simple answer, to permit participants to sell and buy commodities, equities or futures and to exchange one currency for another. But such a simple statement covers a world of complexity. If two parties wish to conduct an exchange, of one currency for another or of an equity or bond for a sum of cash the first question that arises is at what rate or price should the transaction take place? In a retail environment the price is predetermined by the seller and is rarely changed.

How do you cope with the risk and uncertainty that are built into markets, and are you coping effectively?  In this and my next article, I will be tackling these important questions.

Numerous books have been written on the topic of trading success.  Nevertheless, it is unclear how expert traders obtain their expertise.  Several explanatory models are implicit in market writings: