The Forex Trading Paradox: Unlocking Profits in Uncertainty

Why do many fail when practicing Forex Trading? According to the famous trader Ray Dalio, author of the book "Hedge Fund" from the "Market Wizard" series, the answer lies... In a paradox. It is summarized in a famous quote. "In trading, you have to be both aggressive and conservative. If you are not aggressive, you cannot earn. If you are not conservative, you cannot protect your earnings". Resolving this paradox means finding a balance between the needs of aggressiveness and the necessity of conservation. So how do you do it? Here are some tips.

How to be aggressive but not too aggressive

A "moderately" aggressive, or just right aggressive, attitude involves the following behaviors. Don't hesitate when multiple signals confirm that this is the right time to enter the market. Banish fear, risk is and will always be there, so the appearance of multiple entry signals is sufficient motivation to dive into the fray. Avoid small but frequent trades. Very often, fear pushes us to put in minimal amounts and to reiterate this behavior in the hope of making profits that are at least decent in aggregate. This is wrong because the only result is to increase the probability of losing. It's better to focus on more rarefied and better distributed trades over time but with acceptable volumes. Don't overdo it. This is advice that applies to everyone, for all seasons, in every situation. In this case, trading continuously is not a sign of healthy aggressiveness, but of pure (and dangerous) recklessness.

How to be conservative but not too conservative

Here are three behaviors that make a conservative attitude justly conservative. Withdraw money every now and then. This practice, in reality, has no strategic implications. However, it does have a psychological aspect. Withdrawing, in fact, fuels the conviction that, yes, those are not just numbers on a screen. In a sense, it motivates. Be introspective. This is not an abstract advice, on the contrary. Looking within oneself means evaluating one's psychological resilience, thus verifying the ability to execute the next trade. Stand still when moving forward is too dangerous. Very often, the best position is the one never opened. At some points, the market is too volatile and unreadable to get anything good out of it. So it's best to stay put and wait for the storm to end. Balancing aggressiveness and a spirit of conservation essentially means this: risk management combined with a touch of "personal" analysis. The chart is not the only element that needs to be studied. One's state of mind must also be studied.