In Forex trading there is a huge misconception. Many people believe that you must buy or sell in order to profit and if you are not constantly clicking then you may end up missing an opportunity, also called the"fear of missing out" or (FOMO) for short.
Most believe that trading is like a video game where you gain more points (PIPS) for opening and closing trades on a consistent basis. This habit gets so embedded into the minds of some traders that they eventually become addicts of the concept and become what we call a "day trader" or "intraday trader".
Most games are played in a fixed environment, meaning that the rules and outcomes are already predetermined. Take Blackjack for example, you know that there are a certain number of cards in a deck and you don't have to worry about the color just the combination. There are usually 2 players, you and the dealer. There are only 2 moves you can make which are hitting, meaning you can ask for another card from the deck, or standing, which means you want to keep your current cards you are holding. The winner is whomever gets 21, closest to 21, or the highest hand by the end of the match without going over 21 which is called a bust. Seems simple enough right?
Trading does not work like that, in fact it is played in a variable (non-fixed) environment.
In the markets you aren't so certain who is on the other side of your order and how many other people are trading with you or against you nor are you so sure which direction the market may move next (up, down, or sideways). There are an unlimited amount of possibilities that can occur in the market from the moment you place an order. These day-traders do not understand that the market functions completely different from any other game in the world.
The Design Of Trading
Here is a valuable tip, you cannot make money for randomly clicking or taking wild guesses in the market.
You cannot make money if you are taken out of the game.
As long as you have significant capital then you can live to trade another day, the markets aren't going anywhere anytime soon.
Staying net positive and having enough funds in your account to take another trade when the opportunity is right is the single most important concept in trading.
Certainty VS. Uncertainty
Trading systems are built off of certainty. The only way a system can tell you what to do next is if it is certain of a specific setup occurring that it has already backtested over a lengthy period of time and have statistical proof that there is a higher probability of that move in the past successfully happening again. There are no guarantees in the market though so there always has to be room for uncertainty, this is why it is important to always trade with a stop loss.
Compare this with Blackjack where there is a guarantee that you will win if you hit 21 and
the other opponent doesn't or busts and you don't. Most games operate in the same way.
The only certainty we have as traders besides our systems predicting a probable move is how much we are risking and if we want to buy, sell, or sit on our hands and do nothing.
If you are buying or selling you are indicating that your system has given you a signal to do so, otherwise why would you be taking a trade? It better not be off of emotion or impulse because I will tell you straight up that you will not last long in this industry.
Doing nothing is powerful because the market trends less than 30% of the time and moves within a range for the most part. That means if you take a trade today and have a stop loss and profit target in place then you have done everything you can and just have to be patient and wait it out. This is the single hardest thing for most retail traders to do.
They are dazzled by the desirable social media lures of people posting quick profits and over-leveraging large lot sizes to make it look like they hit a home run type trade. Trade like them and you will continue to feed the market more money like a slot machine in the casino, giving most of your earnings to the sharks of the game and the brokers who profit off of your commission. There's a very good reason why many off shore brokers have intriguing ads rewarding traders with bonuses for being active and trading a certain amount within a short time but I will cover that in a future blog post.
So to sum up this post, sitting on our hands and being patient is the best move we can make as traders because the longer we stay in the game, the better probability we have of our trading systems and edges working in our favor.
I have been trading the financial markets for the past decade and have failed to the point where there were no other ways to fail. I trade for myself with my own financial resources and enjoy the freedom of being my own boss managing my independent business built from the ground up. Feel free to message me anytime with questions.