As a professional in the Forex industry, I'm often asked by
my friends and family about the best way to trade Forex. Well, the first thing
I tell them is "Don't", because Forex trading requires a serious
commitment that most people can't follow through with most of the time. Of
course, there are always the persistent ones who don't give up that easily,
because they are serious in their desire to learn how to trade Forex.
If you're not going to give up on your desire to learn how
to trade Forex successfully, then I want to let you in on a couple of little
secrets that Forex educators and 'experts' will seldom talk about. By the end
of this article, you'll be clued in on the best way to trade Forex that most
people don't even know about.
Challenges Every New Trader Faces
Every new trader has one massive obstacle when they begin to
learn how to trade Forex: themselves. Who you are as a person and everything that
you've learned from your life experiences up to this point is not an asset in
the world of Forex trading, in fact, it is a massive liability. If you try to
bring your normal, everyday decision making processes into the world of Forex
trading, you will experience a lot of frustrating losses.
Let me give you an example to illustrate how hard it is to
learn how to trade Forex. Traditionally in life, and I know that this is an
oversimplification but do bear with me here, we grow up learning through
positive and negative reinforcement. In the case of positive reinforcement, it
means that when we do something, and the result makes us feel good, then we'll
keep doing that something. In the case of negative reinforcement, it means that
if we do something, and the result makes us feel bad, then we'll stop doing
that something.
Pavlov's Bell In Forex Trading
That's all well and good to keep you from burning your hand
on a hot stove, but if you allow positive and negative reinforcements to
dictate your trading, then you're in for a real baptism of fire in the markets.
That's not the best way to trade Forex... it's the worst! That's because the
Forex markets have a certain element of randomness to them. That means that one
day, you might decide to take a long trade based on your analysis of certain
indicators or patterns, and if it is profitable that day, you'll associate that
pattern based on the good feelings you have for winning.
Now comes the part that gets traders stuck for years in a
cycle of failure and despair. Tomorrow, when you see the same pattern or come
to the same conclusion for a long trade from your analysis, then you'll take
the trade again. Only this time, the price falls and you get out of the trade
at a loss. Now you're feeling bad about your trade, and all these negative
feelings get associated with the previously successful pattern or analysis. Now
imagine this dynamic in play for hundreds of trades and dozens of combinations
of patterns etc., and you have a real recipe for confusion and frustration.
The Best Way To Trade Forex
Many people don't even realize that they're being affected
by the reinforcements that the Forex markets dish out, which is why they run
around for years from Forex expert to Forex expert, trying to find the best way
to trade Forex so that they don't have to lose, because in their minds losing
is bad. Well, the best way to trade Forex isn't actually to avoid losses at
all! The best way to trade Forex is to find a pattern or trade opportunity that
is profitable in the long run.
The best way to trade Forex is to overcome the natural
tendency of your mind to think in absolutes, and start thinking in
probabilities. That means that instead of considering just one trade or a
handful of trades, you analyze the same trade opportunity over a hundred or
even hundreds of trades. If by trading this 'long run' of trades you end up
with a substantial profit, then you keep trading it. If not, then you forget it
and apply this same analysis and line of thinking to other trade opportunities.
Don't Learn How To Trade Forex From Scratch!
Obviously, this entire process gets very tedious if you're
always doing it manually, because there are thousands of combinations of
indicators, patterns and market conditions to test! That's where you can save
yourself a whole lot of time and money by piggybacking on someone else's
efforts in finding these profitable opportunities, and even have a
pre-programmed system in place that can trade these opportunities for you. As a
trader wanting to learn how to trade Forex, you'll get where you want to be a
lot faster if you get yourself a simple Forex trading system rather than to
develop and trade one yourself.
That said, without overcoming the challenges of positive and
negative reinforcement in Forex trading, you're no better off with a system
than trading on your own. The system is not the key, but your understanding of
the best way to trade Forex is. So, switch your thinking from absolutes to
probabilities, and once you're ready, save yourself a whole lot of time and effort
by investing in a simple Forex trading system.
