trading

It is often difficult for Forex traders to realize that the currency market is incredibly unpredictable. As new traders invest a lot of time trying to discover the mechanics of Forex trading, and focus
their energy and time on finding a technique for predicting price movements, they naturally expect there to be rules or at least guidelines governing the movement of the market. Since this is not the case, it leaves many new traders at a disadvantage before they even get started.

While traders have a number of tools at their disposal that allow them to assess when to enter or close a position, many choose to rely primarily on one tool. After opening a position they look at their favorite indicator like it’s a crystal ball, and base all their trading decisions on that one magical trick alone, neglecting the others.

This often works well initially, until this indicator starts to tell them something different from what the other traders are looking at. Traders caught in an open position that their favorite indicator tells them to hold, will do so frequently, regardless of the fact that other tools tell them to exit the trade maybe with a small loss. And then they eventually end up losing a lot of money when they can no longer hold on to the position because their losses are too great.

The basic problem, of course, is that the trader does not look at the market as it is, but through the glasses of his or her own expectations of it, and uses his or her preferred indicator to reinforce these concepts instead of looking at the big picture to better understand what the market is doing.

And, encouraged by the fact that the indicator he or she has chosen forecasts the profit target they want, the trader focuses more on the money that they could get if their prediction becomes true, than on what the market is willing to give them.

If the Forex market (or any market for that matter) was not unpredictable, it would collapse because all traders would be taking advantage of it all the time. There are many tools that can help traders predict market directions, and they generally perform quite well, but it should not be the be-all and end-all. Even in the hands of the most skilled traders, the best tools don’t correctly predict market movements all the time.

Losing a trade because an indicator incorrectly predicted the direction of the market is a natural part of trading and traders must accept this. In addition, traders must learn to avoid putting themselves in a position where they are stuck in a trade. A friend of mine had some finger trouble entering a trade, he was looking at the wrong chart, and though the trade did not execute, so he hit the button a few more times, only to realize he entered a trade multiple times on a different chart. It was a losing position immediately, but because entered the trade by accident, instead of immediately cutting his losses, he rationalized himself into holding onto the trade, waiting for it to turn around in his favor. Two weeks later, he was still holding onto the trade, which by then had grown into a massive losing position. Don’t do that.

As a trader you have to accept the fact that the market basically has a mind of its own, and our job is to follow its movements, instead of trying to make it go in the direction we want it to go.

2020-07-13