Why is Forex Trading so Difficult ?
Why is Forex Trading so Difficult Most trading sites will tell you that all you need is to purchase a trading system or take part in a weekend-long training and you will be well-off for the rest of your life. If an trading guru offers a quality system, it should, in theory, not be a problem to profit by just replicating the system correctly. In fact, however, most traders are not driving Maseratis. Where is the problem, then? |
| Why is Forex Trading so Difficult |
The more experienced traders mostly agree that the greatest problem is not their trading approach but their psychology. In short, they are not disciplined enough to do what they set out to do. In this article, we will be discussing why trading is so difficult for us as human beings.
Our mind is programmed to operate on the basis of causality
Why is Forex Trading so Difficult From an early age, we are used to the fact that a particular action will produce a particular reaction which we usually do not have to wait for too long. For example, if we have studied for a test, we expect a good grade, or if we have bought a bus ticket, we expect to be able to ride the bus. How does it work in trading? In trading, there is no direct proportion between the number of hours spent studying, trading itself and the money earned. Unconsciously, we expect that spending often even many hours a day studying and trading, the profits must be turned almost automatically. When profits are not turned, we needlessly start to feel frustrated.
Resistance to the unknown
Why is Forex Trading so Difficult In everyday life, we can say that we do know some of the things. For example, we know that 2+2 = 4, which is a truth that does not change over time. On the contrary, every moment is unique on the markets. Yet, most trading systems rely on models that have occurred in the past. The traders who created these trading models with their decisions will never be trading in the same composition or making the same decisions. The markets, therefore, form incredibly varied environment where we under no circumstances can ever be sure where the market is going to turn. Despite that, we incessantly try to apply to the markets price patterns obtained in the past. In essence, there is nothing wrong with that but it is always necessary to keep in mind the fact that historical behaviour of the market have absolutely no connection to current market action.
Our subconscious
Why is Forex Trading so Difficult Our minds are made up of the conscious and the subconscious, of which approximately 10% are conscious and 90% of our personality are formed by the subconscious. Consciousness provides for tasks we perform consciously. For the male population, this is a maximum of one operation per a given moment. On the other hand, the subconscious provides for an enormous number of tasks we do not do consciously. These may include very basic tasks or behaviours learned over time which we initially performed consciously. Surely, everyone knows this: we are walking around town and we have an important phone call which we have to consciously concentrate on. In the meantime, the subconscious mind ensures walking, avoiding other people, stopping at the crossing, orientation, and countless other things. When the phone call is over, we may not even remember the route we took.
The primary task of the subconscious mind is the protection of our well-being. The bad part is that the subconscious mind also protects us when trading. As soon as I give a couple of examples, it will all be immediately clear.
- Premature termination of a position– if trading causes us stress, the subconscious wants nothing other than to rid us of stress. That is why it pushes us to withdraw from a position.
- Freezing before entry – the subconscious wants to eliminate the stressful situation, therefore it makes us reluctant to enter.
- We accept low profits – any positive figure as the outcome of a trade causes joy. At the same time, the subconscious does not want that this positive number changes to a negative one – God forbid!
The power of the subconscious is enormous: we can spend a whole week promising ourselves that we will not move stop-loss prematurely but the minute it comes down to it, we make the same mistake again. The very act of shifting stop-loss is often done completely automatically.
When we think about it, both the subconscious and the trader want the same thing – the profits, but the path to profits leads through situations that the subconscious is trying to completely eliminate.
This article is unfortunately not to conclude in a clear plan to make the subconscious cooperate. I think that no such instruction exist. However, one way of alleviating the impact of the subconscious can be to start in small steps with sufficient capital and position sizes that do not cause stress.
And what causes you problems? What has helped you?
