The Holy Grail of trading in forex. If you are searching for something like that, you might never come across something like that because there isn’t one, but there are a few things that you might wanna take a look into. As a forex trader, getting known to these 5 fundamental truths of trading can be a booster in your trading journey.
If you are into trading for a long time, you might have come across the name Mark Douglas, below mentioned trading principles are taken from “Trading in the zone”, these fundamental truths of trading will not only make you a better trader but will upscale your overall game.
5 Fundamental truths of trading by Mark Douglas
Anything can happen
The first truth among these 5 fundamental truths of trading is not is certain, specially in trading. If you have been in trading for some time, you might be able to relate to this. As a forex trader myself, there are times when things don’t go as per your trading strategies. Sometimes you are so damn sure about your technical analysis, everything is falling in your line, the support and resistance levels are all set and a fake breakout or pullback and here is your stop loss or maybe an event (well, I don’t trade when a big news is about to come).
Well, this is something you will be coming across in your forex trading journey multiple times, and this is a part of trading. As soon as you understand this, the sooner you’ll be on the path to being a better forex trader.
You don’t need to know what is going to happen next to make money
You might have heard, that forex trading is not gambling. If you seek to see the future while trading (a lot of us try to), then are you on the right path? Is it even possible, if I speak of trading, not only it is something that won’t work and will be decreasing your confidence at an exponential rate.
Basically, trading is a business in itself and you should be taking it seriously as a business. Just think of it this way, will you even treat a business on the future possibilities or more over the calculated risk with proper analysis of the market condition, working over the trading psychology and your trading system (strategy)?
Just in case if you are wondering, is it hard to learn forex trading, I would recommend you my another article on it.
There is a random distribution between wins and losses for any set of given variables that define an edge
As I have already mentioned before, trading is a high-risk involved calculated probability business, and sometimes you come across wins and sometimes losses. The distribution between wins and losses will never be equal or the same under a given set of variables. This win and loss ratio is something that can make your trading journey better and was a must in these 5 fundamental truths of trading.
In order to make yourself better in the terms of trading, proper position size depending upon your account size and making a proper strategy & trading will help you. If I speak in simple words, remember on an initial phase you should focus on small wins and not on being rich in a short period of time (not possible, admit it).
An edge is nothing more than an indication of a higher probability of one thing happening over another
Having an edge in your trading strategy is something that looks like an indicator in your trading strategy.
An edge is nothing more than an indication of a higher probability of one thing happening over another. In other words, an edge is a way to increase the chances of success in any given situation. While there are no guarantees in life, having an edge can give you a significant advantage.
Every moment in the market is unique
No doubt that every moment is unique in your forex trading journey, the profit that you get, the currency pairs you trade on, the lose money, the time frame, etc. all combine in such a way that you’ll always be learning something from it.
Just in case you are still confused and want to learn more about forex trading and need some questions to be answered, you might wanna read some of the latest posts.
FAQs on Forex Trading
What is Forex Fundamental Analysis?
Forex fundamental analysis is the study of economic factors that can affect the price of a currency. This includes factors such as interest rates, inflation, and economic growth. Forex traders use fundamental analysis to determine whether a currency is likely to appreciate or depreciate against another currency.
What are the 4 types of forex traders?
There are four main types of forex traders: scalpers, day traders, swing traders, and position traders.
1. Scalpers try to take advantage of small price changes and make a profit quickly.
2. Day traders hold their positions for a short period of time and aim to make a profit from the intra-day volatility.
3. Swing traders hold their positions for longer periods of time and aim to take advantage of the overall trend.
4. Position traders are the longest-term type of forex trader, and they try to take advantage of long-term trends in the market.
What is a fundamental strategy?
A fundamental strategy is a plan or course of action that is basic or essential to achieving a goal. It is the foundation upon which all other plans and actions are built. Fundamental strategies are often long-term in nature and may take many different forms, depending on the goal they are meant to achieve.
What are the 5 types of trading?
The five types of trading are:
1. Scalping
2. Day trading
3. Swing trading
4. Position trading
5. Momentum trading
When should you not trade forex?
There are certain times when you should not trade forex. For example, if there is a large amount of political or economic uncertainty in a country, it is often best to avoid trading its currency. Additionally, it is typically advisable to avoid trading during times of high market volatility.
Why trading forex is so difficult?
Trading forex is difficult because it is a very competitive market. There are many participants in the market, all of whom are trying to make a profit. This means that there is a lot of competition for trades, and it can be difficult to make a profit. In addition, the forex market is very volatile, which means that prices can move very quickly and it can be difficult to predict what will happen next.
Do I need to spend a lot of time monitoring forex trades?
No, not really! It will be taking some time to make your way around to be a profitable trader, not by staring over the screen but by focusing on the parameters to analyze the forex market, and later getting along with the proper execution of your trade along with proper risk management, so if you are about to begin trading in forex or is new to all this, remember real traders don’t stare the screen whole time, well this can be considered among some of the basic truths of trading. In simple words, you don’t need to spend a lot of time monitoring trades in Forex.
You can also set up your trading platform to automatically close out trades when they reach a certain level of profit or loss (Take Profit & Stop Loss).
With all this, I’ll be summing up this article on 5 fundamental truths of trading by Mark Douglas, and just in case if you come across any of the other queries, feel to leave a comment or contact me on my email address.
