Losing Money with Forex - What's The Problem?

Trading forex is not a common or usual activity. And so, our approach must also be unusual. The solution is to change our psychology, or, how we think about trading forex. This will not only have to do with our emotions but also it will have to do with understanding what is actually happening in the currency market. We know exactly what situations we encounter on the road when we drive, and we know exactly what we have to do to get paid, when we are at work. We feel comfortable about these things and we even succeed at doing them. In fact, we are comfortable about doing those things because we know exactly what it takes to succeed at them.

And so, to become successful at trading forex, we must, in the same way, become comfortable with it. This means we must make it clear to ourselves what it takes to start making money with forex. What are the things we shouldn't do under any circumstances? What are the things that we should not consider as mistakes, even if doing those things decreases the capital of our trading account? It sounds unusual, but we must accept it.

Why do we ask questions about forex that do not matter?

It is not at all unimportant to speak about things that do not matter, as well as the things that do. Some of the questions a beginner trader might have are listed below. They are very tempting to ask, and people make them sound like they bear crucial importance to being successful at trading. This doesn't mean that these are the right questions to ask, but by acknowledging what those questions are, we can avoid asking these questions in the future. In addition, because there really isn't much to say about the questions that hold no value, I will provide information that I feel is useful.

• What is the best forex strategy?. As implied by the question itself: the best forex strategy is the one that makes us the most money quickly and definitely. Asking this question is like asking: How do I make a fortune with forex in 24 hours? Had I known the best strategy for trading forex, I could be implementing it every hour of every day and become rich quick. Unfortunatelly for us, there is no such thing as the best forex strategy. We will eventually learn that the answer to this question is much harder than it seems to be. Having a feeling that the answer may be difficult to understand is a good sign that we are starting to ask the right questions.

  People are different in their approach to trading the currency market. And even if you listen to what they have done to succeed, there will still be saying things they thought differently about, things they can't quite explain because their experience with the market was different. Perhaps they were excited about consistenly gaining an amount of money in the favor of their trading accounts. And they have created a fantasy that their strategy was a success. Or perhaps it was a strategy that really worked. But whenever we feel uncertain about what to do, we retreat from doing it. We do not ask how to succeed in a situation in which it is impossible to suceed. We will not guide our car into the exit lane if we know there is another car in the blind spot.

  Only a beginner would ask a question such as: What is the best forex strategy? As our experience with trading forex increases, we will no longer be concerned with such a question. You will learn, likely the hard way, what strategies work for you and what market conditions and circumstances different strategies work in. Sometimes there is no perfect strategy for a specific market condition. This is when we are uncertain about what the market is going to do. We will simply avoid entering a trade at such times. And if anything is learned here, we will not listen to the people who own our trading software because they are only concerned with getting their commissions from our trades. We must only always listen to ourselves, and what we gained from our own personal experience trading the currency market.

• What is the best platform to trade on? Someone who is making money with affiliate programs that point people to forex trading platforms will say that the best platform is the one that makes them the most commissions. Of course they will skip that fact, too. They will just put the link to that platform's site on top of the list.

  A manager of an account of a trading platform will tell you that their platform is the best, and will even tell you some reasons of why they are better than the other services, whether it is true or not.

  A professional trader will say that the best platform is the one they use. Without giving you a reason. Because what we already own, we place more value on. By the way, this is a proven psychological concept.

  But I say to you, the best trading platform is the one that you lose the least amount of pips per trade. Consider this situation. If you pay 2 pips to enter a trade, and 2 pips to exit a trade, and you gain 10 pips total. You have only gained 6 pips! But you've put enough work to gain 10 pips. This means that 40% of your profit goes to the dealer's desk. This is like going to work only on Mondays, Tuesdays and sometimes on Wednesdays. This is a sure way to get fired from work! So why are we so open to accept such things when we trade forex?

• What chart to trade on? - 5 minute, 10 minute, 1 hour, daily, weekly and monthly charts. When we trade forex, we do not trade on any one chart in particular. We use multiple charts at the same time to analyze the current market conditions. This is why forex traders use 2 and up to 4 monitor set ups. Sometimes even more. But that's crazy talk. Here is one way of thinking about it. This is a mirror within a mirror example.
  

  
  We are interested in watching the market from all perspectives at the same time. If we only use the 5-minute chart, we are missing information about trends on a more global scale, such as the hourly, monthly, or weekly charts. Traditionally, before we make a plan to trade a currency pair, we check the chart that contains the most information. Some people use the monthly chart, some use the weekly, depending on the duration of their trade. For traders who trade on a 2, 5 or 30 minute charts, it is still a good idea to check weekly and monthly ones. If both weekly and monthly charts show a certain downtrend, we do not want to make a long trade even on a 5 minute chart. This can effectively reduce the chances of a losing trade.

These questions sound almost too easy to get an answer for, that it seems like people ask them to avoid thinking about the important questions, the answers to which are hard to obtain. And who wants to put effort into doing all that work anyway? It is obvious that when we ask such questions on a forex forum, someone will give us an opinion about which trading platform is the best one - and it is almost never not the one they use themselves!. When we ask what the best strategy to trade forex is, it feels that someone might just have the answer. After all, all they would have to do is explain their own strategy or anything that, at least at one point worked for them. Nobody wants to talk about the strategies that failed and took a good-bite-size chunk out of their trading account. But these things do and will happen to you. In fact, if you ever become interested in trading for a hedge fund, one of the questions during your interview would be: what is the largest amount of money you've ever lost on a trade in terms of percentage of your entire account?. See, people who are serious about making money with forex, understand the importance of money management, they are not interested in how much money you've made, because they want to know how good you are at risk management.