Having an investment out there and being patient enough to just let it run its course is something that is difficult for even the most seasoned of veterans, but especially so for those trading on the Forex. The Forex, or Foreign Exchange market, is where nations, investment banks, institutions, and other investors come to exchange/trade currencies.
Over 5 trillion dollars exchanges hands every trading day in the Forex market. The Forex market is open Sunday through Friday, making the Forex the largest and most fluid market in the world. One of the reasons investors love the Forex market is because it is easy to understand, and has plenty of opportunity for big profits, due to the volatility.
While fluctuations in exchange rates can lead to large profits, they can just as easily zero out an account. Forex accounts tend to be highly leveraged, as much as 100 to 1 or more, so profits/losses can add up quickly.
Fear, greed, even faith, all of these very basic and real human emotions play very huge roles in the decisions made by investors. The fear of loss is a very real and valuable human emotion meant to help us evade danger and survive, but it can kill you when it comes to trading on the Forex.
Every investor on the Forex, every single one, will lose from time to time if they trade long enough. No trader is perfect. Even investment gurus like Warren Buffet lose on a trade/investment sometimes. Like it or not, investing is a gamble/calculated risk.
Investors increase their odds of success on the Forex by identifying the most profitable currency pairs with the least volatility and then place stops with their order to insure against catastrophic loss.
However, even with brilliant technical analysis and the best investment strategy, a loss is going to happen. Fear can play two damaging roles at this point: Fear can either scare the investor away into not investing again; or, it can compel the investor to “get back in” on a position quickly in order to make their losses back. In both cases, fear is now guiding investment decisions and will ultimately lead to missed opportunities and potentially greater losses.
Backtesting is one method used by many of the top investors on the Forex market. To do this, an investor creates a theoretical portfolio performance history. This is accomplished by applying current asset criteria to the hypothetical portfolio and then evaluating the accuracy of the strategy. How accurate is it in predicting price movements? If you can consistently identify long term trends using the strategy at least 70% of the time, then the theory has merit.
You do not need to backtest forever before investing again but definitely continue this practice while investing on the Forex in order to further refine your strategy and test its effectiveness. Whatever you do, avoid allowing fear to compel to you to do the opposite, and that is to over trade.
A series of small losses will eventually add up to a big loss so never enter a position unless the charts indicate it is the right thing to do. If your strategy is sound and the charts are correct, then you will be very successful on the Forex market even when the occasional losses are factored in!
“A penny saved might be a penny earned, but a penny multiplied, makes dollars. Dollars multiplied, makes a living. Dollars multiplied effectively, makes you financially independent!” Michael “MJ The Terrible” Johnson – Founder & Owner – Masters of Money, LLC.
What Makes A Successful FOREX Trader? – https://www.mastersofmoney.com/whatmakesasuccessfulforextrader/
Risk disclosure: *All investments involve risk. Before making any financial or investment decisions, we highly advise that you seek the advice of a properly licensed and trained investment professional.