Forex Trading: How to Make Use of Your Psychological Capital

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This is what psychological capital is, because it is important for Forex Trading, and how it is possible to optimize it with a view to growth.

Making Forex Trading does not mean analyzing the charts coldly, investing and waiting for the result. It is not a mechanical activity (or it is also a part of it). On the other hand, the image of the winning trader, which he portrays as an imperturbable money-making machine, is a wrong image. The trader is a man, and as such is governed, in actions and thoughts, by his psyche. Above all, he is an individual endowed with psychological capital, just like the others.

It is precisely this psychological capital that plays an essential role in trading, until it determines the hopes for success. In the following article we offer an overview of this interesting concept and provide some advice to cultivate a good psychological capital and put it to good use to increase earnings.

What is psychological capital?

First of all, the definition of psychological capital. Actually, the name says almost everything, though – for the sake of a complete understanding – it is necessary to trace its boundaries.

Psychological capital means the set of some merely psychic elements. Or …

  • The modalities of reaction to negative events.
  • The methods of reaction to stress situations.
  • Thoughts about one’s own person.
  • The thoughts about their future.

Therefore, the ability to resist shocks or, on the contrary, the tendency to break down is part of psychological capital. In the same way, the capacity to endure events whose outcome is uncertain, but which are characterized by a certain amount of stress, as well as the inability to do so, and the tendency to adopt a lackluster approach, falls within the psychological capital. Self-esteem is part of psychological capital, as well as self- esteem; optimism for the future as well as pessimism.

All are endowed with psychological capital because, very trivially, all have lived, and specifically everyone has experienced victory and defeat, particularly stressful life periods. Moreover, it is impossible for an individual not to have a precise image of himself and do not think about the future.

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Good psychological capital and bad psychological capital

It is evident that, if everyone has a psychological capital, not all of them have the same quality. Without prejudice to the physiological respect that must be paid to every human being, especially when it comes to his psychological sphere, exactly this aspect must be taken into consideration: some psychological capitals are useful, or good; others tend to be harmful, or bad. All this at least in a trading context, but this could also apply in contexts where a certain level of performance is required. But what is meant by good psychological capital and bad psychological capital?

In a sense, we replied in the previous paragraph, when we presented each “part of the capital” in a dichotomous form.

Therefore, it is good that psychological capital in which a certain capacity to endure defeats predominates, to see them as an opportunity for growth. In short, the so-called resilience.

Similarly, psychological capital is good that allows the individual to resist stress, or at least do not end up crushed by it. The same can be said of that psychological capital characterized by a serene and moderate optimism for the future, also seasoned by a good self-esteem for oneself.

It follows that bad psychological capital is characterized by …

  • Poor self-esteem
  • Chronic pessimism about the future and basically unmotivated
  • Tendency to enter into panic during stressful conditions, or in any case to lose lucidity
  • Tendency to break down in case of defeat or negative event, which leads to a compromise of lucidity and reduction of willpower

So far, everything is clear. The main problem is not to understand aseptically what is meant by capital but psychological, but in …

  • Recognize the quality of one’s psychological capital
  • Improve it if necessary

The psychological capital in trading

Psychological capital is of great importance for trading activity. In a certain sense it determines their fate. This is a fact that cannot be avoided. It is simply impossible that psychological capital and trading take two separate paths. On the other hand, it is also true for any activity that requires a minimum of commitment and is characterized by a significant level of difficulty.

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The role of psychological capital in trading is self-evident for some specific reasons …

  • All traders experience, certainly in varying degrees, the experience of defeat. Even the best, those who really manage to create wealth from trading, are sometimes defeated (often, to tell the truth).
  • All traders, but everyone, live stressful situations. On the other hand, there is talk of investing their money. Above all, to invest it in a context characterized by an endemically high level of risk.
  • From the self-esteem and the way we look to the future depends on the quality of our actions and our approach to the action itself, and this applies to trading as for any other activity.

So, if its psychological capital is good, the trader will be able to …

  • Making sure that the defeats do not undermine the trading action, or push him to deviate from his goals and his strategy
  • Manage risk better. It is precisely this, in fact, that determines a strong condition of stress
  • To continue with its strategy in a convinced (by virtue also of his self-esteem)
  • To engage more and more, to make sacrifices, as optimistic or at least hopeful

Obviously, the trader comes to the debut in the market with an already formed psychological capital. Everyone has a story behind it, and this story has formed their psyche.

So are the games made? It’s not for sure. If it is true that psychological capital is still a pre-existing element to trading activity, this does not imply that it can be enriched or improved.

This is a long path, which in large part takes place outside of trading and involves, rather, the relationship with oneself.

Clearly this is not the place to offer advice on psychology, but we can still mention some elements that, unequivocally, recur in every attempt at emotional and psychological growth …

  • Analysis of one’s own experience
  • Reading of one’s own life from different angles
  • Identification of events able to demonstrate the presence of a good psychological capital
  • Acquisition of a new awareness about oneself

It is therefore a matter of establishing a good dialogue with oneself, and of demonstrating to one’s “self” that yes, resilience, optimism, resistance and self-esteem are at hand simply because, in the past, if it is used at least once.

As already specified, it is a difficult path, which many are able to carry out. Those who succeed, however, find themselves with an inestimable treasure, to be exploited for their trading activity but especially in everyday life.

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