There are many concepts in Forex that are often unexplored. Most of the people are busy with the trends, volatility, movement of the price and the information that affects the trends. The way to achieve success is not easy because the mind tries to play the game with us. One of the game is recency bias. It is the phenomena that explain how recent events can affect behaviors. As the trading is not consistent, investors have to undergo through a journey of random wins and losses where it is common to get lose the fund. As a result, they will stop acting rationally and are influenced by the recent experience.
This is the recency bias, the phenomenon that can either make us a winner or lose the money. Not many professionals have focused on human psychology. It is important to understand all the plan derives from the mind. If we fail to control the mindset and get affected by experiences, it may not be possible to get the desired result. Every trade is different from the previous one and as long it has been not realized, this phenomenon will keep on affecting the performance. We will talk about it and try to focus on ways to overcome these risks.
How does it happen?
It happens from the last experience that people have experienced a few moments ago. As the traders are investing money, there is a tendency to get motivated by the result of the last investment. This explains why the winners keep on trading when there is a winning streak. The trades are open and until there is a loss, they will not stop trading. It is this same psychology that affects performance. We act what we have been through and the mind starts forming a pattern. If there have been continuous losses in the last trades, we started to fear the decision. This results in a worse selection of the strategy and more fund are lost. If there was a win in the last trade, we are motivated and plan or the next trade with the same plan. In a word, the past events shape this phenomenon.
Take things simply
Those who are really eager to make a profit in the Forex market should definitely keep things simple. Try to analyze the important data so that you can easily find quality setups in your SaxoTraderGo online trading platform. The complex trading system might seem lucrative but it never works in the long run. Moreover, it makes you confused and forces you to overtrade the market.
How it affects performance?
It can affect the traders both positively and negatively. We will start with the positive advantages although these are not much. Have you ever seen a successful investor who has recently made a big profit? The person is filled with confidence besides every decision reflects the strong belief in the trading process. Winning can fuel with positive charges which in turn, makes the performance more successful.
Not every trader is lucky and most of them lose their capital. After some continuous failures, the common trends become scary for people. The decision is taken after much thought, there is no confidence and even small volatility can make the trade closed early. It is a sad fact that people tend to remember the bad memory but forget success.
How can I overcome this problem?
You need to develop a strong mindset, focus on the future, never think of the failures and start every day with positive thoughts. Remember, this is a long journey that will reward with many bonuses. There will be flaws but that should not distract from the goal. If this sounds hard, practice in the demo account to develop control over the mind. As long as there is a reflection of the past trades, the goal can never be achieved.