It’s hard to know what the ratios are between skill and luck when trading forex. On the one hand, the more experience and knowledge you have in any task, the “luckier” you get. But with forex, this same experience can lead you into a false illusion of having your trades under control. This can be true even for traders who never turn a profit! Hence, that’s what makes the feeling of being in control an illusion. Everyone is susceptible to illusions – they are an essential part of our existence! But in trading forex, we need to learn to play it straight. Playing it straight means making our trades according to hard statistics and careful analysis.
Relying on False Parameters
Although forex is a complex market, it is also one that can be tracked through trends. Some traders rely on complex and complicated trading strategies because it makes them feel more in control. Of course, this is an illusion because it doesn’t take into account important statistics. To find out if your strategy is working, take a look at your bottom line. Are you making profits, or are your entries and exits losing money? Yes, it can be hard to make money and for sure it takes hard work. But there’s no need to reinvent the wheel after every loss.
Reviewing Trade Journals
Don’t make your trading strategies overly complex just to feel more in control. This won’t bring you closer to winning. If you can recognize this behavior in your trading style, then it’s time to back off and spend some time analyzing your trading history. This is where your trading journal comes into play, and why keeping a careful record of each and every trade is so important. Begin to go back over your trades that lost and pinpoint the reason. Do the same thing for your winning trades. Start charting where you succeeded and where you failed. This will take you away from only having an illusion of control. Let’s say that knowledge is power and you can use the knowledge you gain from your own trading history to improve your bottom line.
Analyzing the Charts
While many movements in forex might seem random to an outsider, well-trained traders can track trends and analyze current situations. According to statistics, trends and market movements, you can tweak your trading strategy. Instead of depending on intuition or hoping luck will come your way, let the facts and figures do the talking. Don’t fall into the trap of kidding yourself, that if you just make new charts and trading styles that you will have more control over your trades. Look at the performance metrics of trading systems, but be aware that until you use them in a live market you can not trust their validity. Avoid false illusions by working with correct numbers and methods.
Bottom line? Don’t overestimate your ability to control trading results. Log your trades, study your results and use them to strengthen your trading systems.