It's tough, isn't it? Having an investment out there and being patient enough to just let it run its course is something that is difficult for even the most seasoned of veterans-but especially so for those trading on the Forex! The Forex, or Foreign Exchange market, is where nations, investment banks, and other investors come to exchange currencies. Nearly two trillion dollars exchange hand in a given 24-hour period of trading (the market is open 24 hours per day, Sunday through Friday) making the Forex the largest and most fluid market in the world. Investors love the Forex because it is simple and has plenty of opportunity for profit thanks to its volatility.
However, while those fluctuations in exchange rates can lead to large profits-they can just as easily zero out an account! In fact, they can cause losses to mount even faster than potential profits because Forex accounts tend to be highly leveraged-as much as 100:1-or even more in some cases!
Fear, greed, even faith-all of these very basic and real human emotions play very huge roles in the decisions made by investors. The fear of loss is a very real and valuable human emotion meant to help us evade danger and survive-but it can kill you when it comes to trading on the Forex!
Every investor on the Forex-every single one-will lose from time to time if they trade long enough. The market is always right and we humans can never achieve this level of perfection-not even the investment gurus like Warren Buffet get it right every time. Like it or not, investing is a gamble-a calculated risk. Investors increase their odds of success on the Forex by identifying the most profitable currency pairs with the least volatility and then place stops with their order to insure against catastrophic loss.
However, even with brilliant technical analysis and the best investment strategy, a loss is going to happen. Fear can play two damaging roles at this point: Fear can either scare the investor away into not investing again; or, it can compel the investor to "get back in" on a position quickly in order to make their losses back. In both cases, fear is now guiding investment decisions and will ultimately lead to missed opportunities and potentially greater losses.
Backtesting is a common tactic practiced by many of the top investors on the Forex market. To do this, an investor creates a theoretical portfolio performance history. This is accomplished by applying current asset criteria to the hypothetical portfolio and then evaluating the accuracy of the strategy. How accurate is it in predicting price movements? If you can consistently identify long term trends using the strategy at least 70% of the time, then the theory has merit.
You do not need to backtest forever before investing again but definitely continue this practice while investing on the Forex in order to further refine your strategy and test its effectiveness. Whatever you do, avoid allowing fear to compel to you to do the opposite-that is over trade! A series of small losses will eventually add up to a big loss so never enter a position unless the charts indicate it is wise to do. If your strategy is sound and the charts correct, then you will be very successful on the Forex market even when the occasional losses are factored in!
Related Articles
Why Trade The U.S. Dollar?
By: Kent Douglas | 15/03/2007 | Finance
The Forex is an informal marketplace where investors from around the world come to exchange one currency for another. In truth, the investor is buying one currency while simultaneously selling another. Dozens of currencies are exchanged and all at varying rates that fluctuate constantly. There is the potential for unlimited...
How Do Forex Brokers Make Money?
By: Kent Douglas | 16/03/2007 | Finance
It is one of the most talked-about advantages of trading on the Forex-the commission-free trades! Unfortunately, while we would all like to think that Forex brokers are just out there executing trades for the fun of it, the simple truth is that everyone needs to make money-even the brokers....
Are The Forex Brokers My Friends?
By: Kent Douglas | 16/03/2007 | Finance
This is a very good question and sadly not one that enough investors think to ask. After all, when anyone first enters into Forex trading there will always be a lot things that you don't know and your broker would seem to be the logical source of great information-right?...
Apply "the Secret" To Forex Trading Success
By: Kent Douglas | 16/03/2007 | Finance
The Forex market is the largest trading network in the world with $1.8 trillion dollars being exchanged every day. There are dozens of different currencies traded but the big players to focus on are all traded with the US dollar and include: EUR (Euro), GBP (British pound), JPY...
Who Are The Top Forex Chart Providers?
By: Kent Douglas | 16/03/2007 | Finance
When it comes to investing on the Forex, there are two basic paths you can choose: Fundamental or Technical. Fundamental investors look at changing interest rates, GDP figures, and other economic indicators to help them anticipate fluctuations in the exchange rates of currency pairs. Technical traders, on...
What Is Dow Theory?
By: Kent Douglas | 11/03/2007 | Finance
You may find yourself wondering what Dow theory has to do with trading on the Forex (Foreign Exchange market-where nations, corporations, and now retail traders go to exchange currencies). Well, before Charles Dow began writing his theory over a century ago, the idea of speculating on the markets was...
Just Who Trades Forex Currencies?
By: Kent Douglas | 11/03/2007 | Finance
Fifteen years ago, you would not hear about people trading on the Forex market-at least not real people. Until that time, only central banks, large hedge funds, and other financial giants like Warren Buffet could afford to dabble in the currencies markets. Today, however, the Forex is the most fluid...
The Roulette Wheel Of Forex-improving Your Odds
By: Kent Douglas | 11/03/2007 | Finance
There are two factors that really determine whether an investor will risk capital or not: the potential for profit and the ability to liquidate the position should things start to head south. Real estate is a very stable investment for one simple reason: they aren't making any...
Got a Question? Ask.
Ask the community a question about this article:
Frequently Asked Questions
Senior property benefits
By: gkniffen | 19-08-2008
how old to you have to be a senior in stamford conn
My son purchased an RV a few years ago. He is now ...
By: Paula | 18-08-2008
my son purchased an RV a few years ago. He is now in prison and his money is depleted to make the payments. Right now his account is up to date but he is out of funds to make future payments. How do we try to salvage his credit rating? How do we return the RV?
Sawbuck
By: Dave Glenda Wood | 18-08-2008
if a fin is 5.00, and a c note is 100.00 dollars, how much is a sawbuck?
$250,000 annual income
By: Don | 18-08-2008
How many individuals make over $250,000 per year?
AAA capital Ventures says they can raise your ...
By: Ruben | 17-08-2008
AAA capital Ventures says they can raise your credit score no matter how bad.Are they legit
Hi, I am looking for a Yearbook for Burbank High ...
By: Ann | 17-08-2008
Hi, I am looking for a Yearbook for Burbank High School for 1969.
Thanks,
Ann
Q&A Powered by:
More from Kent Douglas
Who Are The Top Forex Chart Providers?
By: Kent Douglas | 16/03/2007 | Finance
When it comes to investing on the Forex, there are two basic paths you can choose: Fundamental or Technical. Fundamental investors look at changing interest rates, GDP figures, and other economic indicators to help them anticipate fluctuations in the exchange rates of currency pairs. Technical traders, on...
Apply "the Secret" To Forex Trading Success
By: Kent Douglas | 16/03/2007 | Finance
The Forex market is the largest trading network in the world with $1.8 trillion dollars being exchanged every day. There are dozens of different currencies traded but the big players to focus on are all traded with the US dollar and include: EUR (Euro), GBP (British pound), JPY...
Are The Forex Brokers My Friends?
By: Kent Douglas | 16/03/2007 | Finance
This is a very good question and sadly not one that enough investors think to ask. After all, when anyone first enters into Forex trading there will always be a lot things that you don't know and your broker would seem to be the logical source of great information-right?...
How Do Forex Brokers Make Money?
By: Kent Douglas | 16/03/2007 | Finance
It is one of the most talked-about advantages of trading on the Forex-the commission-free trades! Unfortunately, while we would all like to think that Forex brokers are just out there executing trades for the fun of it, the simple truth is that everyone needs to make money-even the brokers....
Why Trade The U.S. Dollar?
By: Kent Douglas | 15/03/2007 | Finance
The Forex is an informal marketplace where investors from around the world come to exchange one currency for another. In truth, the investor is buying one currency while simultaneously selling another. Dozens of currencies are exchanged and all at varying rates that fluctuate constantly. There is the potential for unlimited...
Why Are Currencies And Forex So Popular?
By: Kent Douglas | 15/03/2007 | Finance
It is called a pip and its value is the equivalent of 0.0001 of a dollar, in most currency pairs, and it is the smallest increment on the Forex market. A pip in the Japanese Yen is 0.01. Now you might find yourself wondering what the Forex market actually...
Tell Me About Forex Scalping
By: Kent Douglas | 15/03/2007 | Finance
Trading on the Foreign Exchange market, or Forex, has become increasingly popular due in no small part to its sheer size and volume of trading. There was a time when only the large investment banks and other "institutional" vehicles of finance could play in the currencies market but now...
Forex - There Is No Sure Fire System
By: Kent Douglas | 15/03/2007 | Finance
Anyone claiming to have a sure fire trading strategy for the Forex is either lying or truly a genius because none exists-period. The Foreign Exchange market, or Forex, is the single largest market in the world. Actually, the Forex has no centralized market location but instead exists as an informal...
Finance 
