Most of the price fluctuations in the Forex market are just noise, that is, price movements which are not part of the general trend but rather price movements which are likely to turn out false and be reversed.
You’ll frequently hear analysts in the news giving all kinds of explanations for why prices have moved the way they did, but rarely do they give any hints before the prices move. Sometimes their explanations are even bizarre after the fact, but nonetheless, that’s their job and we can’t blame them. They don’t care because they don’t lose or make money based on their predictions. Their job is only to provide entertaining analysis.
Usually, analysts want their analysis to be proven right and they’ll keep listing reasons for why they are right even when the market persistently moves in the opposite direction. But, traders don’t have that luxury because traders lose money if they cling to their opinions when the market is going against them.
As traders, our job in the market is to make a profit, not to be right. It’s a very subtle but a very important distinction to make. People commonly think that you first need to be right about where the market will move before you can make a winning trade.
That is not necessarily the case. There is no need to justify or validate your views on the direction of the market. Real traders only care about where the next opportunity (price move) will happen, regardless of whether the direction is up or down and regardless of whether they like that direction or not.
When it comes to being right in trading, it’s only the market that is always right. Successful traders know this and they act accordingly. They don’t fight the market and they don’t hold onto positions that are moving against them. They listen to what the market is saying.
And, the market is speaking through the price and that’s what profitable Forex traders pay attention to. Regardless of how extensive and in-depth your analysis is, if the price is persistently saying that you are wrong by going in the opposite direction then you need to give that analysis some serious second thought. If you don’t learn this on time you’ll learn it the hard way – by losing money.
So, it’s important to keep the perspective right and don’t get off track which is only looking to make a profit on each trade and not to be right. Do this and you will most likely succeed in Forex trading over time.
Lastly, here’s an interesting thought to keep in mind when trading Forex.
Just as there is an unfortunate possibility to be right about the direction of where the market is going and still make a losing trade, in the same way, there is also a fortunate possibility to get the overall direction wrong but still score a winning trade.
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