Forex Trading: 7 Hard-to-Swallow Truths

Forex Trading is not an activity to be taken lightly. This, in a sense, is the first truth that traders learn, usually the hard way, and also the most important one. Obviously, there are others. Some leave us emotionally indifferent: they are simply facts. Others involve the trader's most intimate sphere, striking them as a person even before being an investor. They have to do with the emotional resources that each person invests in their activity, and in a certain sense, they can even undermine them. Here are some of these truths, the most difficult ones to accept.

Your enemy is yourself

In life, and even more so in trading, people are quick to find the culprit for their failure. After all, it's very convenient to attribute responsibility to some external force, or better yet, to a specific person. In short, it's convenient, almost reassuring, to find an enemy. In trading, but also in life, your worst enemy is... Yourself. You are the obstacle that prevents you from achieving success. Many will have understood the reference to the emotional sphere. Emotions cannot be erased. Even the richest and most competent trader experiences them. Too bad that emotions reduce decision-making ability, both the bad ones and the good ones. The only way to deal with the issue is to exclude emotions from trading activity, that is, to plan your operations in a precise and detailed way. Of course, with a bit of training and practice, you can learn to be less emotional.

You will lose

This is perhaps the hardest truth to accept (after the one described at the beginning of the article). In Forex Trading, you lose. Defeat is around the corner. Everyone loses, from beginners to the best. Obviously, what makes the difference is how much, that is, the ratio between the number of defeats and the number of losses. Regardless of this consideration, however, it is unthinkable to start trading hoping to never lose. Especially since an alarming statistic has now spread: 85% of traders end the year at a loss. After all, it is for this reason, precisely to cope with inevitable losses, that disciplines for risk containment and capital management have been developed, such as Risk Management and Money Management.

Forex Trading is not fun

Or, better to say, it is not necessarily fun. Obviously, there are those who find it fun, almost like a hobby. Certainly, these are fortunate people (but only up to a certain point, that is, until the positive feelings related to trading do not degenerate into something related to gambling). In reality, in Forex Trading, as in trading in general, the opposite attitude pays off, that is, the one that considers the investment activity as a kind of job or second job, as a demanding activity. Also because, on closer inspection, it is in all respects. The important thing is to maintain a balanced approach, even if you consider Forex Trading, perhaps inadvertently, as if it were a game.

Technical analysis fails

Many place an almost blind reliance on technical analysis. After all, it boasts statistical elements, and basically it is based precisely on statistics, on modeling what happens in the market. Here we do not want (despite the impactful title) to deny the usefulness of technical analysis or, much less, to push to neglect it. We simply invite you to consider it for what it is: a discipline with its advantages, its merits, but also its limits. Even if technical analysis were carried out in the best possible way, accurately and intelligently, the probability that the signals will prove unreliable is still significant. The advice, therefore, is to always adopt risk containment initiatives and an exit strategy program to be executed promptly.

The market is irrational

It is one of the reasons why technical analysis sometimes fails. Not only that, it is also one of the reasons why fundamental analysis fails. That is, the reason why interpretations and forecasts of the effects of market movers may contradict reality. Both analyses, both technical and fundamental, are based on the assumption - and they could not do otherwise - that operators are rational. Unfortunately, this is not always the case. Indeed, the expression "panic on the stock exchange" is now emblematic, and in a certain sense it has always been concretized, since the market has existed.

Some brokers cheat

The brokerage landscape is affected by bad apples. That is, by brokerage companies, or alleged ones, whose purpose is not to offer a service but to scam others, earning on the ingenuity of others. Fortunately, there are few, at least compared to a few years ago. If their number has decreased, the credit goes to the many reports from traders, and even serious brokers, and to the strenuous work of supervisory bodies. The advice, however, is to always keep your guard up when looking for a good broker. Beware of incredible offers, those that are too good to be true, and above all avoid those who do not have a verifiable license issued by a regulatory body.

Some papers are biased

Many refer to papers to orient themselves in the market. Given the nature of Forex, certainly more dynamic, this practice is not widespread but still practiced by a substantial slice of traders, at least to produce a general fundamental analysis or to receive some contextual notes. Be careful, however, what you read. Some papers are biased, that is, they try to pull water to their own mill, to facilitate the achievement of the "corporate" objectives of this or that company. Luckily, there are few, but learn to recognize them. The signs are many, including "making it easy" and a not even so implicit promotion of this or that product. Forex Trading is not all roses. In fact, there are some very hard truths to accept, however necessary to learn and internalize.