Be In Harmony with the Market
Posted on 26. Mar, 2007 by admin in Forex Articles, Forex Basics, Forex Market
We make money trading when we are in harmony with the market. We are long when the market is going up, and short (or out of) the market when it is going down. If we bring an opinion with us while trading, we will end up fighting the market. We keep trying to go long as the market is declining, or we keep shorting a market that it is in a bull phase.
DONT FIGHT THE MARKET
Fighting the market is not good for two reasons. First, we lose money. How much we lose depends on how well we are managing our money and controlling our risk. Second, fighting the market affects our judgment, and causes us to try to confirm that our judgment is correct, or persist in fighting a trend so that we will eventually prove to be correct. We figure that if we persist long enough, no matter how long it takes, we will eventually be right. The same can be said for being in a canoe in a river. There is a reason for leaving your car downstream, launching your canoe upstream, and paddling downstream. It is much easier and eminently more fun to go with flow and paddle downstream.
We could do the opposite and paddle upstream. Eventually we may even get to our destination, but the cost would be substantial. It would take much more time, more physical and emotional stamina, and we would be constantly fighting the current. Reaching the goal would not be worth the cost. Even if you ultimately make money fighting the market, it is not worth the price you have to pay, both financially and with peace of mind.
LET THE MARKET TELL YOU WHAT TO DO AND WHEN
The correct attitude for successful trading is to let the market tell you what to do. If the market says to go long, buy, and if it starts to go down, sell. This sounds easy but it is much more difficult than you think. We always like to believe that we can be in control. We want to be in control of our trading and of the market. If you accept the notion right now that you cannot control the market, that all you can control is your execution of trades, you will take a great step toward being a successful trader.
Instead of trying to control the market, let the market tell you what to do. Let the market and your strategy take you long rather than you personally trying to predict or decide when to go long. Let your strategy take you out or get you short. Once you realize that you can’t understand the market, and that you can’t predict when the market will move, you will move into that detached state of mind where you let the market take you where it will when it wants to.
THE MARKET GIVES AND THE MARKET TAKES AWAY
To remove your personal biases and let the market tell you what to do is to give up control, to give up the notion that you are actually in charge of how much money you make. For profitable trading, you need to move into the mental state of letting the market determine the profits, not you. It won’t be whether you predict the market correctly that determines the profits, but whether your strategy is in a profitable mode or drawdown mode as determined by the market. So, let the markets tell you what to do based on your strategy. Let it get you long and put you short. Let the market determine how much money you are going to make. Trade your strategy and let the market do the rest. And know that the market gives money and the market takes away money. Your goal should be to develop a strategy that gives you more money than it takes away.
