Why do people get Forex margin call while trading Forex? Most people do not understand the cognitive operation between human instincts that tend to contradicts with logical Forex trading principles. Among the psychological functions, the two major cognitive systems prevail defense mechanism and free will.
The defense mechanism can be divided into two categories: a physiological and psychological defense mechanism. First, the physiological defense mechanism will react to protect its physical body from any harming threat at all time. If there is a situation where physical harm is inevitable, the body will not just sit idle to take the injury.
The psychological defense mechanism is related to self-ego and its nature to carry the information that was previously accepted. For example, If the formerly accepted data was “apple is red”, and if other information tells “apple is green”, the self-ego will label the other information as false and will not acknowledge. This psychological defense mechanism often results in group behavior where the congruent information is agreed among the people.
While trading, both physiological and psychological defense mechanism comes into play contradicting with the mind. In its nature, the Forex market is more profitable when it’s more active and liquidated. There are so many factors that cause a shift in the market price and it is traded at best only with a flexible strategical mind. The physiological defense mechanism recognizes loss as a threat and will react to protect the asset defensively. The psychological defense mechanism faces a struggle in following the constant changes in the market and it will try to keep its previously accepted information, which makes trading even more stressful.
The market signal for upward and downward trend is detected faintly for those who kept the keen eyes open and waited for it. The entry and exit point must be planned out as soon as the trend was analyzed accordingly. However, with the defense mechanism refusing to accept the change and inclining to act passively, profit chances can be neglected and failed.
Traders must somehow fabricate a way to bypass this instinctive nature, but it does not mean that it can be kept that way. Why do you fail your own strategy and get Forex margin call more than you expected to be? It’s because you are a human being, not machinery. Humans are bound to refuse the information that was not verified by past experience. Furthermore, humans have free will that chooses to act freely from restraints, unless the restrains promise prominent benefits.
How can you overcome the defense mechanism and free will?
The only way to win against the instinctive operation in the cognitive level is creating a pattern that can be accepted by the defense mechanism and free will. By constructing a pattern of trading disciplines and enforcing it until accumulating sufficient positive outcomes to be realized, the cause-and-effect experiences can make its way to be accepted as benefiting action to the unconscious operations. In order to do that, you must always think based on probability mindset that involves 3 step discipline. The reason, plan, and execute the strategical decisions until your mind accepts the fact that such restraints will ultimately give in beneficial gains in the end.
Train yourself to get used to the struggle between the unconsciousness and the mindset. Make a habit of applying the discipline every time the market changes. Carry around the analyzed charts anywhere you go and come up with your own target goal and margin. When you keep the inside war predominantly, you will start winning and gain confidence. Win the war within yourself, then not only you can avoid Forex margin call, but you can also conquer the Forex trade.