Why Is Trading Forex So Difficult?
According to most marketing campaigns, Forex trading should be a breeze and you should quickly acquire a small fortune in no time at all. Unfortunately, reality does not support this viewpoint and indicates that a far more scientific and structured approach is essential in order to achieve consistent success.
In fact, most professionals would advise you similarly in that you need to adjust your thinking about Forex trading so you can elevate it to the same levels used by experts. To achieve success at Forex, you fundamentally need to complete a sequence of consecutive successful Forex trades as often as possible. What does that really mean and is it difficult? Let us try and answer these questions by considering the following analysis.
For each trade you open, consider that you will need to target an achievable profit of 50 pips that may require you to trade, on average, for about 4 hours. In addition, you will then need to obtain a consecutive sequence of successful trades in order to obtain a good profit e.g. 20. This study, therefore, implies that you will have to trade Forex for about 80 hours in order to achieve your targeted objective. This is both a long time and a very daunting prospect as Forex is anything but stable and is, in fact, capable of producing brutal, unforgiving and vicious movements at any given time without warning.
Despite the complexities just outlined, many novices think they can trade consistently with 80% plus accuracy. They believe that they should easily be able to transform $1,000 into $100,000 in a matter of months. They think they can predict turning points in Forex to within minutes. They think they can buy a system that is 100% accurate. They even think they will quit their jobs and make a living full time after a few months of trading.
What is the reason that so many new Forex traders believe that trading is an easy way to make money? Propaganda! We are continually bombarded in magazines, emails and the general media with claims that astronomical amounts of money can easily be made by simply applying the vendor's latest Forex method or system.
Forex Trading is not a 50:50 bet. You cannot do Y and get Z every time. Forex Trading is as much an art as it is anything else. There is no magic formula. Forex Trading is all about probabilities whereby you must apply a set of carefully thought-out rules in selecting each new trade but after you have determined the chances of it resulting in success.
In addition, each new trade must be considered as an independent event because Forex does not remember if you lost or made money during your previous ones. So and in conclusion, you must develop a mindset that will allow you to produce a Forex trading system that should, at least, be capable of overcoming all these difficulties.
In fundamental terms, you would expect making money on Forex should be a relatively easy task. After all, Forex can only move in a very few limited directions, which are upwards, downwards or sideways. At the start of each day, you should just need to ask questions such as ‘Will the dollar fall or rise today?’ In addition, as you should be able to regard this as just a black and white question, it should be quite simple to answer. So, what is the problem?
You will soon realize, however, that the above question is just starter and soon many more will spring up that also need answering. In addition, you will find that they will become more abstract in nature. For instance, you will need to know which currencies the dollar will rise or fall against. Can you detect any long-term trends that the currency pairs are forming? How will you determine whether the dollar will move far enough against another currency so that you can record a decent profit?
You will also need to worry about any major fundamental news items that could be released during the day that may seriously influence the performance of your trades. In particular, you will have to be careful that any sudden reversals are not strong enough to stop-out your profitable positions. Unfortunately, these questions can become increasingly more difficult to address if you do not possess mystic powers.
You may find even more disconcerting is that experienced traders make costly mistakes as well. However, all is not gloom if you understand that you do not need to be successful one hundred percent of the time. In fact, you do not even need to win more than you lose, but you do need your winners to be consistently bigger than your losses in order to attain a profit over the long haul.
How can you achieve such an objective? Unfortunately, your initial impression of just tossing a coin goes out of the window. You can deduce just from the above short analysis that Forex is anything, but black and white and is, instead, very complex. As such, you must definitely not use guesswork or your gut instincts to make your trading decisions.
In contrast, you will need to develop a trading strategy that is capable of producing profits for you. You can do this by using the technical analysis tools that are provided by your Forex broker or other similar professionals.
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