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Why trading forex is so difficult

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why trading forex is so difficult

It was by far one of the most exhilarating, exciting, emotionally consuming and useful in terms of lessons learned episodes of my life. It was also one of the most difficult endeavors I ever started, in terms of energy and effort. What follows is a little list of all the things I learned during these 6 months. But before diving into it, a few introductory words, for those who have no idea what forex trading is in the first place. If you do have an idea about forex trading, you can safely skip the next two paragraphs. Forex means foreign exchange rates, and forex trading means buying or selling foreign currencies in pairs. If public companies have shares that you can freely buy and sell on the market, then countries have currencies. Now, a company share value is an expression of what people agree to pay for it, based on a number of criteria: Consequently, a country currency is evaluated against another country currency, based upon a set of criteria too: In forex, you trade pairs, like selling EUR and getting USD, for instance. GBP british pound, also known as cableJPY the YenCHF the Swiss franc and so on. I only traded majors, crosses have usually a lower liquidity. Very simply put, forex trading means you can do only 2 things with these pairs: Using whatever capital you want to invest, that is. If you buy, then you expect the price of your pair to be bigger in a certain amount of time. If you sell, then you expect the price of your currency to drop. You open a position at a certain price, and set your attitude: Once opened, each position will generate a profit or a loss, depending on your choice long or short and on how the market moves. The market goes up, so now forex your initial investment, you can get back 90 EUR. Suppose the market goes down and your position is now worth 70 EUR. You just lost 10 EUR. Of course, these paragraphs are only scratching the surface literally, the amount of information about forex is ginormous. There are a lot of other things to be known or learned, from technical analysis, like candlestick charting, price actions, and so onup to the trading mindset, like avoiding revenge trades, sticking to a trading plan and so on. The first thing you need to know about actually trading forex is that this is a 5-days-in-a-row type of activity. It starts Monday at 0: There are few financial hubs involved in the process, and the most important are for difficult trading the majors, that is: London Stock Exchange, New York Exchange and Tokyo Exchange. Forex trading never why stops, so as the world goes round, the price will also be influenced by the specifics of the prevailing financial hubs. The most important part of the day traditionally is the overlapping time between London and New York, because you can allegedly get the highest liquidity, hence the most predictable models. There are 3 types of information which are influencing this market: Technical analysis tries to isolate recurrent or predictable patterns based on past behavior. Fundamental analysis tries to connect the major economical indicators to the value of the currency from GDP variations, up to more obscure economical data. I traded mainly on technical analysis. Seemed the safest one for me. There are heavy advocates of the fundamental trading, as well as the news trading. Trading by technical analysis means also that I had to spend a lot difficult time studying charts and trying to create reliable predictions. In itself, this activity was very rewarding. I learned tremendously and many things I discovered during this process would have never entered my universe, without the risk taken to just dive in. This stuff only can be applied in many areas of my life. Now, you have a bit of an understanding of what forex trading means. Nobody can control the markets. But there are a few who are taking a profit from them. It never was, of course. The illusion of control is one of the biggest lies our ego tells us. Just because we have a basic understanding of our universe, all of a sudden, we start pretending that we can control it. We start to believe that we can control everything in our lives. To some extent, we can. In technical terms, that means you have to create a specific point at which your losses will be stopped, even if you are around. In terms of life that means: Make a short projection of what is the worst that may happen, in the worse scenario, and stick with your plan. If the shit really hits the fan, just leave. In technical terms, it means you have to create a point in your position, where the potential profit will be automatically cashed in. Trading everything goes according to the plan, that is. What does this mean in real life? It means you have to curb down your expectations. Keep everything in perspective. And keep it transparent too. Once you reached that point, cash in and move on. Forex trading should be a very detached and cold activity. Apart from the enormous amount of information that he has to process, a trader must also process and control his emotions: Those who can master this skill are usually the winners in this field. What does it means in real life? A little bit of control must be exerted continuously on emotions. Not on how they are formed, but on how they are shaping your real life actions. Imagine someone acting exclusively on emotions. Emotions are fundamental for our own psychological balance and a healthy expression of them is desired. Greed is when we do nothing, but we expect everything. In the forex world, greed is one of the two reasons people are losing money the other one being fear, see below. In real world, greed is one of the two reasons people are losing life. In terms of forex trading, fear manifests the moment you close a transaction too soon, hence not getting enough profit from your trades. Fear makes you lose money by not letting yourself cash enough of what you deserve. In real life, this translates into trust. Trust that you judged a set of circumstances well. Trust that you will be rewarded for what you are, not for your momentarily perception. Trust that things will eventually go as you stated. As you may see, it takes a lot of work to balance greed and fear. Both are the engines of the forex trading world, and both are shaping our lives at a very deep, sometimes unconscious level, each and every day. Of course, some days why better than others. During a trade you may see a lot of swings back and forth. Before stabilizing on a trend, the market moves many times. You may have a lot of detours, a lot of stalled moments and sometimes, it may seem that the road is not leading you anywhere. You should always cover your ass as much as you can, but avoiding risk all together will never work. No risk equals no reward. What I really learned was something more subtle: Every risk you take can be calculated and can generate a certain set of results. Another way to put this is: If I risk that amount, this thing will happen. If I risk the other amount, another set of things will happen. The result will be mind-blowing: Very, very difficult, but manageable, if you pay enough attention to all the bumps and to all the possible routes. Every trade should have a lifetime. The longer you stay with a trade, or with a single way of trading a. When you get too trapped into something, being it a relationship, a business, a forex trade, you lose balance. As of today, I get to work on 3 big areas: Whenever I feel trapped into one area, I switch. It will never happen. Of course, there will be losses. But the sooner you get out of that losing trade, the smaller the losses will be. For me, that was the first big moment when I realized forex trading is a very, very difficult business, and you have to embrace it with a very clear mind and attitude. I was guilty of clinging to the past. Like the past was holding everything that my present needed. The past is dead. The only thing alive is now. This a very difficult lesson. Because it challenges one of your deepest convictions, which is: Go with the flow. For instance, you may have all the reasons to predict that the market will go up, and yet, the market goes down. All you had to do in order to win was to go with the market. I traded divergences heavily. A divergence is formed when the price seems to go up, but the indicator tells you that this is not exactly right. In real life, for instance, a business may show signs of going strong, with a lot of sales and good karma. But behind the curtain things are not so good: There might always be a divergence hidden way below the surface, waiting to hit you the moment you expect this the least. So, if forex trading is so interesting, why did I give up? And because I decided it was enough of a lesson for the time being. Am I going to trade again? Im still a virgin but I am going to learn trading. I will find my niche and be disciplined. Im a little nervous, but mostly excited that this inspiration matches who I am. I am very interested and and want to be really good at what it takes to do this. As I am reading blogs and watching videos and learning of the different systems I know I will want to become well acquainted with, I came upon your insights and wanted to say thank you. I am taking notes and really appreciate that you shared your ideas. I used MetaTrader as a platform and mainly candlesticks and price action. I got into it by curiosity and stayed there because of stubornness. Once you reach I have lots of friends losing so much in FX. Actually you must be well aware of it before taking too many risks. Hi, You got a really useful blog I have been here reading for about an hour. I am a newbie and your success is very much an inspiration for me. The FX market is a dangerous place for people who are unprepared and are expecting quick money. Point 3, is easier for beginner traders. A set and forget Target Profit. Its like being thrown forex the jungle with nothing. Can you share links or any other resources that one can use to understand? So basically I got into binary options and without learning muc, and following advice from brokers, I lost my shirt and then some! Silly I know but chalk it up to lesson learned. Any thoughts or guidance? Play big and now lost so much. Revenge trade immediately after you lost because you wanna make it back. Plan what to do when you win. Plan what to do when you lost. You lost so much, you start to doubt. You question your system. You question your entry. You expand your stoploss. You play to make money. Thanks for the inside. I really appreciated it. It helps me understand the fear, how to and what if and fruits of labour. Getting about 10 students to learn about trading Forex using just a smartphone. I like the way you write. I do not agree with all of what you write, but that is not the point. My point is that you have written a blog post, which is good for new traders; because there are some universal issues at stake here. Another thing I like about your sharing is this; Even though you did not stay in the world of trading for a long time, you write about how trading made a huge impact on your way of thinking — also on your life outside of trading. That is a very positive thing. I will try to point out some of my thoughts about some of the issues you wrote about in your blog post. Two lines about myself. I am a forex trader as well as an entrepreneur and teacher, currently living in Greenland. One of the most dangerous aspects of any kind of trading in the modern world is the very easy access. Say a person like to become a trader, he can rush to the computer, open an account and buy a stock or some currency. So 5 minutes after thinking: Now what will happen is this. This person will feel he is really good at trading. So the problem here is this. It is way too easy to start trading. Most of the people have no clue of what they are doing when they go into trading. In your blog post, you describe well the basic things about trading. That is something we need to know, but we need to know something more — and the very difficult thing about trading is that many of the crucial thing to learn are contra intuitive. My intention here is not to go into that — only to say that there is a big problem with this easy access to the markets today. But to me, it is nothing odd about almost everyone losing — because generally people do not prepare for trading; most people rush into it and trade for the thrill. Just the fact that very few traders realize the conflict of interest between you as a trader and your broker. When you go to a website of a broker, you will see the broker offer information on how to trade?!? To be a good trader, you will only take information from a source with whom you have no conflict of interest. Just google a little bit, and you will see a lot of people claiming their broker chased their stop loss. Maybe this can happen, but I believe that most of the time this should just be seen as frustrated traders, who blame a broker. In a business like this there will be a lot of angry clients. Furthermore you write in your blog post, that you need to be connected to the markets non-stop Sunday to Friday. A broker would be happy for such a trader, because the more you trade, the more commission you pay to your broker. And furthermore we know that it is way easier to get profitable in trading if you are trading on the bigger timeframes — we do also know why so many new traders trade all the time, and on the smaller timeframes. One thing I sense in your blog post, and a fact that I like is that you have taken some experience from trading and used it in other areas of your life. This is very positive. Many new traders are so obsessed with the money aspect in trading, that they totally forget the learning we can get from trading. The MOST important thing for a new trader to understand is this: You are the asset in trading. You are much more valuable than gold or anything else, if you realize that you are the real asset. If you realize this, the first thing you will do, is to seek out proper knowledge about your business, e. I agree very much with you about the fact that we cannot control the markets — but that is no problem. We can control ourselves, we can control how we position ourselves; we can control when to trade, and when not to trade. So as you say, it is very important to know what we can control. This means that chances are that you are closing a winning trade to early — another interesting aspect with these studies was that most of the new traders did not want to close a losing position. This has to do with the next thing you write about, control of our emotions. Many people write about this. What we can do is this: We make all our decisions before we take a trade, e. After we have put on the trade, we leave the computer. This is the great advantage of trading the longer timeframes. When we are in front of the charts, that is when our emotions are most difficult to control. So by sitting less in front of the computer, we put less stress on ourselves. What you say about greed is interesting. In my opinion, we should talk about two different ways of greed. One is good greed and one is bad greed. Good greed is when you like to do good for you and your family without hurting other people. Bad greed is when you like to do well, even if you have to take advantage of other people. Sure, there are a lot more bad than good greed in the world. But to often we see people say greed is a bad thing. I believe greed in the right form is very good. If a new trader has decided to stay in the game and go for the long run, then he should know that trading does not reward safe play; if you do not risk anything, then you cannot win anything. But this is not the same as saying trading is like gambling. The good trader knows how to control risk. The good trader know how to control leverage and take advantage of that. This would be very risky unless you are pilot — but for the pilot forex is not risky because he has been trained in controlling the risk. We can say by using the idea of break even the proper way you are bringing down the risk very much, if you are well educated, financially and you know what you are doing, and why you are doing it, your chances of building your account are much bigger if and when you use, and know how to trade with the concept of break even. In the end, we have to remember the fact that trading is a probability business. It is not about being right, it is about consistently doing the right thing. Most of the time the right thing is very simple — but not easy to execute. At the end of the blog post you said you were not prepared. Most people never get to this insight, so that is great to see. What is you opinion about the way Brokers work? I have heard many stories which insinuate that brokers are targeting inexperienced and new FX Traders and chase stop-losses and advertently delay entries to increase slippage. They are only able to do this because the software allows them and produces tools for them to achieve their scams. It appears to me that the industries tries to coax you in to trading under false pretences by distracting you with never ending tutorials about technical and fundamental theory when in fact they are just trading you into a trap where they have control over your destiny. Your email address will not be published. Notify me of follow-up comments by email. Notify me of new posts by email. Home Blog Archives Top Posts About Me Work With Me Contact Search. Dragos Roua The guy who started all this. Entrepreneur, ultra-marathoner, tanguero, father and risk taker. I'm blogging here, but I also spend a lot of time in this marvelous space. You're invited, by the way. March 13, at 6: March 13, at 5: March 18, at 5: Sorry man point 3 is not right. Thats it in a nutshell anyway! April 23, at 3: May 6, at 6: Hi Dragos, May I ask how much you lost from trading forex eventually,? Or did you end up in the black? May 10, at 1: When I hit break-even, I got out of the game. May 28, at 6: September 14, at 8: October 24, at 3: November 3, at November 17, at 1: Great post and thanks. Please tell me a demo account is best…or not. November 18, at 7: November 25, at 4: November 25, at 6: December 3, at 3: Thanks for the highlights. Difficult you like I can offer a seat. July 1, at 5: Hi Dragos, Thank you for sharing your experience from your 6 months in forex trading. I believe it can help some of the new traders, who follow this particular blog post. God luck with you blog — you page is great and I like your clean and easy design. Cheers, Jonbert Davidsen http: July 4, at why This comment is competing, in terms of the number of words, with the actual post. April 22, at 1: July 17, at July 28, trading 6: August 6, at 2: Blue collar or forex? Which one worth to learn and gain? January 6, at 7: Leave a Reply Cancel comment reply Your email address will not be published. Please leave these two fields as-is: To be able to proceed, you need to solve the following simple math so we know that you are a human: How To Be Successful In 51 Easy Peasy Steps How To Self-Publish On Amazon, Kindle and iBookStore — the Ebook: Time to power up your game! If you play in business, blogging or personal development, we should talk. First session is on me. Home Blog Archives Top Posts About Me Work With Me Contact. why trading forex is so difficult

Why Trading Forex is so Difficult - Randomness in the Markets: Clusters of Bad and Good Luck

Why Trading Forex is so Difficult - Randomness in the Markets: Clusters of Bad and Good Luck

3 thoughts on “Why trading forex is so difficult”

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