One of the most common problems that a new trader will face is “paralysis by analysis.” Typically, what happens is that new traders tries to find trading systems that assure profits, but unfortunately don’t have the wherewithal to hang on through what will certainly be the occasional loss. Traders tend to put far too much pressure on themselves to be perfect, and of course systems are treated very much the same way. This of course is ridiculous, as perfection is all but impossible. Think of it this way: if your retirement planner averaged 11% a year, you are not going to be looking over their shoulder and complaining about any time there was a small loss. You must give yourself the same slack when it comes to trading. Unfortunately, most people don’t, and this is where they start to get paralysis by analysis. Paralysis by analysis is best summed up as having far too many indicators or rules for a trade set up. This leads to a lot of concern and mistrust, and far too many options to bailout of a trade. There are a lot of psychological issues when it comes to trading, but this is probably the most common, as it is easy to set so many rules that you can’t pull the trigger. While a lot of people think it makes sense to have a long list of rules, the reality is that this keeps the trader for making profits. After all, if you are not in the marketplace, you can’t make money. This isn’t to say the should be jumping into the market randomly, but rather that you should make it possible to get involved. One aspect of having a multitude of indicators on the chart is that it is used as a crutch to help with fear. It is a fear of loss that you ultimately are struggling with, which can be avoided by simply trading with the longer-term trend and using proper money management. If you can see everything but price on the chart, you may have an issue. Professional traders tend to use a very light number of indicators.

Greed is a good force that drives you to achieve more and more. Also, greed can be the most dangerous thing that a trader has to deal with. New traders dream of earning millions of dollars by trading and they can quickly lose a significant amount of money. So it is very important to control your greed. The biggest problem with forex trading is that you may be rewarded for being greedy in the short term but you will be punished in the long run.

One of the greatest ways to lose money in the financial markets is to chase a trade after it has taken off. There are lot of different expressions used to describe this behavior, essentially revolving around the “fear of missing out.” This is very common to see during bubbles, as financial markets take off drastically. Essentially, you have the so-called “smart money” getting involved in the market at the very beginning, catching massive gains. As the markets continue to climb, there are a lot of people out there looking to get rich quick. They find themselves buying a move far too late, worried that they are going to miss quick profits.