At its core, trading forex blurs the lines between easy and simple. Being a trader is not easy, but the concept of buying and selling currencies is pretty simple. Most struggling traders fail to realize that much of their preconceived logic from real-life experiences rarely translates into participating in the markets.
Therefore, for the most part, forex is illogical, mainly in how it operates differently from how the average human expects it to logically function. This is a powerful statement, which explains how many can easily fail in the long run. Many of the things holding someone back are counter-intuitive and counter-productive.
In short, how forex trading works is not usually how people think it does. Part of being successful in the game is the knowledge of its rules thoroughly without prejudiced notions from the real world.
From how time works in forex to how some can fall into analysis paralysis, this article will look at how the forex markets are illogical and how traders should deal with it.
The time illusion
We live in a very fast-paced and technological world where things are constantly getting faster and more advanced. Everything in life takes time, though the perception of 24 hours in real life is more like a fraction in the markets. It’s crucial to understand how time functions in forex.
Here’s a quick example of how time operates differently than in the real world. If someone was in a boxing match and received a few blows in quick succession, the logical reaction is to react. Typically, the boxer can retaliate within seconds or minutes.
In trading, a struggling trader who has taken a loss in a trade is likely to immediately take another position in an attempt to recover their losses because, in a similar real situation, that’s what they would do.
Unfortunately, this logic almost always costs traders and in bigger losses than intended. This is just one example reflecting the wrong decisions losing traders make because of their skewed concept of time.
Markets are about opportunities, and whether a trader wins or loses, a certain amount of time has to pass first before moving onto the next one. Overall, time in forex isn’t necessarily an illusion.
The fundamental challenge is humans are naturally impatient, though patience is probably the number one character trait to possess regardless of a trader’s skill, strategy, and experience. Rather than functioning with a fight or flight response, a successful trader appreciates the time and uses the frontal lobe of their brains to act logically.
Forex trading is not like a job
This idea does link with the previous one. The amount of physical time one spends trading does not correlate with the amount of profit. Often, this logic stems from being accustomed to a nine-to-five job. In the latter, while there is a maximum one could earn, each unit of time is proportional to someone’s wage or salary.
Although there is theoretically no ceiling to the earning potential in forex, the amount of physical time spent does not increase how much money a trader could generate. With a traditional nine-to-five, a worker is usually involved in a bunch of to-do tasks with set commands and objectives.
Unfortunately, this notion is utterly irrelevant in forex. It is not a job to stare at charts for hours on end or take a set number of positions according to some schedule. Hence, it is believed that successful trading is actually boring since much of the physical time is spent doing nothing.
With a normal career, there is some level of control and predictability through performing repetitive tasks. However, though traders are using some models of forecasting, no trader can realistically move the markets. The level of control one might have in a job is not present in forex.
Less is more
The ‘less is more’ concept spans many different things. For instance, it’s a common trend for traders to have more than one monitor in their office or room. Of course, the logic behind this decision is understandable; it allows for viewing multiple markets more easily.
However, it is technically unnecessary as much of the trading software has the same functions in one laptop or computer. Though some professionals still insist on having numerous monitors, less skilled traders can experience information overload, which is another big problem.
There certainly is a substantial degree of knowledge a successful trader needs to internalize. The key is drawing a line between what data is important and what is not. Logic does naturally dictate the more information one has, the more skilled one becomes.
While some elements of this mindset are helpful in the realm of trading, some traders overdo it in the desire to know what is going to happen next at every moment. In truth, there are hundreds of variables in action determining how the price will move over a particular period.
Knowing all of these factors is physically impossible and can leave traders over-analyzing their decision-making to the point of uncertainty. In real life, we can do deep investigations into why certain things happen, though it’s impractical and pointless in trading.
Final word
The main conclusion should be to understandably deal with the somewhat illogical nature of trading by being divorced from the things one experiences in real life. How traders interpret time immensely impacts their likelihood of failing or succeeding in the game.
