Forex Trading: Expectations vs. Reality

There’s something about forex trading which breeds rampantly unrealistic expectations. So much so, that half the battle in transitioning from novice through to veteran trader revolves around shedding unreasonable expectations and replacing them with a bedrock of trading realism.

Here are six basic aspects of forex trading where expectation and reality have a tendency to violently collide.

1. Forex Isn’t the Only Way to Earn Money at Home

A lot of people fall into forex because they have this expectation that working directly with money is the best way to earn money, even if they’re not particularly interested in it.

Falling into anything isn’t the best way to land on your feet, but this is especially true when it comes to forex. If you have this expectation that you’ll come to love it in time, there’s a good chance you’ll be disappointed.

The reality is, forex trading actually won’t work for everyone. You may not have the right temperament. You might find the hours on research and speculation makes you cross-eyed. The concept of money and how it moves may bore you. Hell, you might just hate it.

Seems obvious, right? But it’s amazing how many people persist with forex long after they realize they don’t want to do it. If you can’t make forex work for you, don’t make your life a misery trying to fit a square peg in a round hole.

Look at other options. For example, you might want to start a home business. 

2. Good Trading Isn’t About Finding That Perfect Gamble

One common expectation is that getting good at forex requires knowing when to make an “educated gamble.”  

The reality, and one experienced forex traders are going to hit you over the head with time and again, is that if you think you’re making an educated gamble you’re out of ideas and you need to take a step back.

A gambling mentality creates a vicious cycle in forex and it’ll get you into a deep hole really fast. A solid approach to forex trading is one in which the notion of gambling is thrown out the window. Learning to forensically manage risk is the reality of successful forex trading.

It’s probably worth also adding here that lapsing into a gambling approach is only one small step away from addiction, and addiction is an express road to financial ruin for a lot of people.

3. Don’t Trust Yourself!

Not at first anyway.

Beginner forex traders frequently go into trading with an expectation that they just need to build up solid instincts for buying and selling. It seems logical on the surface. After all, a lot of people have a good basic instinct for buying and selling physical products like cars and houses.

With forex though, it works a bit differently. More often than not, your emotions and instincts are not your friend. In fact, half the battle starting out is learning to ignore those insistent voices telling you when to leap forward or backward.

The reality of forex trading is that your emotions and instincts can and will trip you up, sooner or later. And if that happens, the only safe course is to take a step back and carefully analyze what went right or wrong in the cold light of day.

4. Forex Trading Is Work

I blame TV land for this one.

A bunch of fledgeling forex traders leap into the work expecting it to be a breeze. After all, for many of us, it’s about getting away from the brutal nine to five grind. Like any kind of work though, whether in the office or at home, you only really get out what you put in.

The reality of forex trading is that you need to be mentally and physically disciplined. To be any good at it, you’ll need a set schedule, a careful approach to dividing your day and some firm rules about how to manage your work / life balance.

Leave your vacation head for when you’re actually on vacation!

5. You’ll Be Rewarded for Setting Realistic Expectations

The flip-face of this coin is you’ll get punished for unreasonable expectations. Sure there are windfalls to be had in forex, but for the most part, banking on lucky streaks is a recipe for disaster.

Having unrealistic expectations about how quickly you can generate wealth has a tendency to make people twitchy. They want something to happen. Hell, it’s human nature to equate “things happening” with progress.

The rot sets in when you assume you’re doing something wrong because nothing is happening. This attitude can lead the unwary forex trader into to making questionable decisions purely to have something to do.

The reality is, Forex trading rewards people who are patient and who understand the importance of actively doing nothing when the occasion calls for it.

6. There’s No Single Winning Formula

There are a bunch of products out there which claim to offer a simple, proven method to consistently come out on top. Newcomers to forex trading often eagerly jump onto snake oil wagon after snake oil wagon, heady in the hopes of finally landing on that one unbeatable, secret formula. Not only are these expectations unreasonable, they’re the quickest way to burn through your cash with nothing to show for it.

The reality is that no single product or approach is going to work all the time. What works now may not work next week. The only way to consistently make money from the forex market is to understand it, or at least a part of it. And this takes time, practice, self-reflection and study.

Video – A Trader Buys and Sells Goods or Services

There are millions of traders worldwide, and hundreds of different types. Somebody who trades in foreign exchange is a forex trader, while a person who buys and sells cattle is a cattle trader. This Market Business News video explains briefly what they do.