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Forex Trading - The Market Is Not Your Enemy

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Published: 21Nov2009
Word count: 567
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Have you ever had one of those trading days? Have you ever lost money trading and gotten mad at the market? Have you ever taken it personally, lost discipline and tried to convince yourself the market is wrong? Did this make you feel like the market was your enemy? Did this have you fight the trend in order to beat the market only to see your efforts repeatedly stopped out? This has probably happened to most traders at one time or another but it is not something you want to repeat. This article uses an example from currency trading to illustrate its point but it could have been about any other market

The market is not your enemy. It is not a living organism although sometimes it might feel that way. The market is just a place where trades are transacted. Price action may sometimes seem illogical, even irrational but the market is never wrong as it does not have an opinion. It is only a place where forex rates are set. It is the collective will of those trading the market.

There is a term used in forex trading, the trend is your friend. When you catch a trend right, there is little stress, especially if you manage stops so that there is no risk of a loss. When you fight a trend, the market may feel like your enemy if you make it a battle of wills, yours against a place that has no will or opinion.

A good way to illustrate this is by using the price action in the forex market on October 21, 2009 as en example. The focus of the example will be on the EURUSD, which started the day by trying to correct and ended it by surging higher to trade above the pivotal 1.50 level. The range for the day was EURUSD 1.4889-1.5046. There was no apparent catalyst for the move up except for sharp moves up in commodities that seemed to feed off one another. This saw traders try to sell the initial spike up and then repeat trying to catch the top by selling at each pause. This was not the day to repeat this strategy as the EUR/USD continued to march higher.

Now, this is where the “market is my enemy” can take over. You can’t believe the market is acting irrationally and keep selling at every pause. Each time you get stopped out you get angry, not at yourself but at the market. You can’t believe the market is doing this to you and stiffen your back. You forget about what charts are saying, throw discipline out the window and become determined to catch the top by selling when charts are telling you to buy. By the time the EUR/USD peaks you are beaten, having taken your lumps in what has been an emotionally draining day battling with an unemotional market. The EURUSD corrects lower without you on board.

Does this sound familiar? If so, then don’t repeat it. Step back when that feeling comes and take a deep breath. Walk away and come back with a clear head. Remember, the forex market is not your enemy. It is not a living organism. It is only a place where trades are transacted and prices set. When that feeling comes, remember the adage, “the market can remain irrational longer than you can remain solvent.”

Jay Meisler is a co-founder of Global-View.com, the leading forex discussion site for more than a decade and where traders from around the globe come for the latest breaking news, flows, rumors and trading ideas =>http://www.global-view.com

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