Without the right set of rules, and more importantly, the right attitude, attaining a successful trading career can and will be an uphill struggle from the very start. The facts don't lie, and anyone interested in gaining a profitable experience in forex trading needs to accept the facts from the moment they begin their journey. Statistics suggest that around 90% of traders in the market today lose, with just a margin of 10% attaining key success on a consistent basis. Various factors influence these results, and before setting off on their journey, each and every new trader needs to understand that the thorn in the side of many a failed speculator lies in the emotional game.

Market and price movements on a psychological level are due to emotions, predominantly those of fear and greed. Greed drives prices up in the long run as we are all happy to hold onto something when the going is good and things are flying our way. The need to hold on a little longer for a larger gain is easy to succumb to and forces out the emotion of greed, which can often be a slow burner. On the opposite side of the fence, we have the emotion of fear, which is ultimately the true origin point of declining prices and market capitulations. While we are happy to hold on to rising assets in bullish markets, the emotion of greed turns quickly into one of fear when something threatens to take those gains away from us.

The impulsive need to sell quickly to contain the losses as best we can takes over in bearish environments, and the simple fact is that where emotions are concerned, fear is a far more powerful catalyst than greed. On the most basic level, these two raw emotions, if any trader allows them into their actions, can cause the evaporation of an account in the blink of an eye.

Therefore, it should be the primary goal of all traders to do everything in their power to prevent their emotions from running unchecked in the markets. There are many ways to combat emotions, including the use of stop loss orders to contain and control loss and working consistently from a well-structured trading plan. However, when things are moving rapidly on a price chart, even the best-laid plans can be forgotten. In an effort to keep my students on track with their trading during the ongoing training program or when I am teaching in class, I employ a simple technique to combat their impulsion to commit the two biggest mistakes that consistently losing traders make time and time again.

These are:
1. To buy after a period of buying or sell after a period of selling
2. To buy in a price area where supply is objectively greater than demand or to sell in an area where demand is objectively greater than supply

If you find yourself regularly on the wrong side of the market, it is very likely that you have made one or both of the above errors. It can be very tempting to click the buy button on your trading platform when you see large green candles shooting up on the chart as greed takes over and makes you think you have missed the boat, or to find yourself pounding the sell button on the first sign of big bearish red candles in anticipation of complete market failure.

Taking this action usually ends in misery, as the price decides to reverse in the opposite direction very quickly, often making you feel like somebody was just waiting for you to enter the market and take your hard-earned cash. The reason most novice traders endure this ongoing frustration is basically due to the fact that they are basing their trading decisions on emotional signals of market movement, rather than objective rules of buying low and selling high.

It's a common mistake to make and one, which, thankfully, can be easily remedied if the right steps are put into place.

One such remedy I suggest to my students is to fight the cause of the problem firsthand, and this can begin with the charts themselves. Let's take a look at a recent chart of GBP/USD:

Click to Enlarge

This is a chart of GBP/USD on a four-hour time frame with the currency pair in a strong upwards trend and rapidly approaching a key area where supply had shown itself to be far greater than demand. Do you notice how this strong approach consisted of large green candles, with very few red ones? When the novice trader is presented with this typical kind of scenario on a daily basis, the emotions of greed are a majority of the time leading them into clicking the buy button on their account. And why wouldn't this be the case? The market is going up after all, and with the strength we have seen before, it would make emotional sense to go with the flow.

MORE: See Where GBP/USD Headed Next