However such shouldn't be the psychological attitude towards a trade. Even with all signals and well calculated analysis the trend could still go away, it's your ability to understand the market and interpret it within the short and long haul that separates the intuitive trader from the park.
Here are 3 WAYS TO UNDERSTAND THE TREND.
1. KNOW THE CURRENCY PAIRS.
It is important you know the economic activities surrounding the currency to which you have decided to place a trade on. Take for instance, EUR/USD. Have a clear understanding of the stands the European Central bank(ECB) is taking on interests and inflation rates and programs it has chosen to adopt to either beef up or cut rates(Quantitative Easing). Pay attention also to the stands the Federal Reserve Bank in America on it's interests and inflation rates. Same goes for Bank of Japan(BOJ), Bank of Canada(BOC), Reserve Bank of New Zealand(RBNZ), Reserve bank of Australia(RBA), Bank of Englan (BOE) and the likes. All these central banks have a direct effect on the way the currency pairs plays out in the forex market.
2. INTERPRET THE ACTIVITIES SURROUNDING THE CURRENCY PAIR.
Knowing exactly what and how to interpret the economic activities surround the currency pair you want to place a trade on gives you an edge, irrespective of the noise the market makes. For instance two days ago the mid-term elections created so much hullabaloo and traders were hoping that the outcomes could affect the US currency pairs at high levels. Just like it did a night before the US elections two years ago. Currencies and trades were very low and activities was down across the US currencies. When the results began to filter in and it wasn't much of a surprise, it became business as usual among the currency pairs.
Shortly after early this morning the US currency pairs began some sentimental moves across it's pairs all waiting for the outcome of the Federal Open Monetary Committee statement on rates. USD/JPY is going north, USD/CAD, headed north and later south. All these showing the anxiety in the market as to the prediction and outcome of the statement from FOMC.
Bear in mind its same news both the retail traders and institutional traders all look up to but yet take different position. Yes the Feds in the US is clear on increasing interest rates but such is not done at every meeting held. Your understanding of its decision per time matters on the position you want to take, either buy or sell.
3. LOOK BEYOND THE ECONOMIC ACTIVITIES.
This may sound contradictory to the second above, yes it is from the surface but has an in-depth revelation. Even when you see all the green lights, inflation needs to be kept at bay, Job rates is high, interest rates is spiking up and this is a go to the buy area. In some trades you just find out that the price rather than move to the resistance area heading north it goes the contrary down.
At such instance a well informed trader knows that it's the market sentiment at play and there is no economic justification for such a reversal. Yet same informed traders know it's an opportunity to buy low and wait for another spike to take profit.
There are other several economic events that affect currency pair movements and these are important as well to help retail/ day traders understand the short term positions they can take.
I have had people and some self acclaimed traders say they can can turn $10 to $100 and I just smile and walk away at such ignorance and naivety. I am bold to say I have been scared and still bear scars from account i have blown $500 several times.
Yet I still dust myself up and make a come back. Forex trading a not a straight bull ride all the time. It comes with some painful losses and happy gains, this is when you here well informed and knowledgeable traders say your psychology to trading is key.
A british trader in commodities puts it better, he says 'know when to count your losses and move rather than praying and hoping for the market to move in your favour'
I hope this helps I look forward to your comments, questions and opinions on currency, I recommend a reading with www.jarrattdavis.com, I have never met him but he has truly beefed up my confidence in the Fx market ever knowing him online 4 years and counting.
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