What motivates you to trade forex?
Let me make a guess…
Because you want to amass a large sum of money and be able to purchase whatever you desire?
While this is a completely fair cause, it will almost certainly lead to excessive greed and, as a result, the loss of your trading account. Instead, you may take your money to Vegas and gamble it away.
Forex Avarice
The worst motivator for trading is greed. Greed will always be punished by the market, while moderation will be rewarded.
Between merchants and gamblers, there is a narrow line.
When real money is on the line, there are always some who are willing to take a chance.
If you want to be consistently lucrative, don’t think like a gambler, don’t take reckless risks, and don’t rely on luck alone. Remember that luck, like the gambler, comes and goes.
You must understand as a trader that anything may happen in the markets. You will never be consistently profitable unless you embrace this truth.
I know, the concept is ridiculous! How can you, as a trader, benefit consistently from a market with unpredictable outcomes? It’s simply impossible!
WRONG! PROBABILITIES are what we call them in trading and in life.
Despite operating in a sector where the outcome of each card dealt, dice roll, or slot pull is unpredictable, casinos remain successful year after year.
They understand probability and design games that give them an advantage over the house–in other words, “the house advantage.”
While it is true that some people may strike it rich and walk away with millions of dollars, casinos know that if they collect a large enough sample size, there will be more losers than winners.
Take, for example, baccarat, a popular high-stakes card game. The game is quite straightforward. A “banker” and a “player” are handed cards, and all you have to do is wager on one of them.
Because you have equal access to both the banker and the player (and you may even bet on a TIE if you want), it appears like you have a 50/50 chance of winning. In fact, however, this is not the case.
The chances are skewed significantly in favor of the house by altering the regulations, such as charging a tiny commission or limiting the payoff if the banker wins with a specific number. It may only be a sliver of an edge, ranging from 1% to 5%, but it’s enough for the house to eventually win when enough games are played.
It’s important to remember that what separates trading from gambling is the ability to manipulate the odds in your favor. That is why, as a trader, you should think like a casino rather than a gambler, who only looks at one event (or transaction) at a time.
You must trade like the HOUSE and play the advantage across a number of outcomes to become consistently profitable. You could wonder how you’re going to do it. Here are some pointers:
To begin, you must study market behaviors, patterns, and tendencies that may be noticed and transformed into trading chances in the future.
This is accomplished by analyzing price action against a framework (support and resistance, mechanical indicators, economic developments, and so on), documenting your findings, and then designing statistics to keep track of the various patterns or setups.
Keeping a trading journal is also necessary at this point. Using the information from your notebook, you may concentrate on the settings that have a better chance of winning rather than those that have a larger chance of losing.
You’ll also require effective risk management. Limiting yourself to setting up or taking trades with a favorable risk-management ratio will help you increase your chances of long-term success (ie. average bigger wins than losses). The higher the reward-to-risk ratio, the fewer trades you’ll need to win.
If you see that you are strong at detecting and trading double top chart patterns, for example, you may create a trading system that concentrates on finding setups based on double top chart patterns.
If you can take a large enough number of these transactions and your winnings outnumber your loses, you’ll finally come out ahead in the long term!
Last but not least, in addition to your own analysis, you may consult other traders. Free economic and technical analysis material abounds on the internet. You can avoid falling into the “confirmation bias” trap by acquiring a second viewpoint.
Of course, these aren’t the only strategies for improving your odds. But keep in mind that you don’t have to guess where the market will go; all you have to do is find out where price is most likely to go and make the most of it if the deal goes your way.
