Forex: a waiting game

Trading in the forex market can be many things; frustrating, rewarding, soul-destroying, joy-giving, but there is one truth that all traders must understand if they are to profit:

Patience is key.

There is no doubt that patience is a winning attribute for forex traders and any trader that you ask will tell you that you need to wait for the profits to come.   If you are new to forex, then you need to wait for your knowledge and skill to get up to speed. And if you are not new to the game, you will know that losing periods must be waited out, in order for the good times to come back around.

A Guest Post by  FXTM

Why you need patience

To understand why patience is such an important virtue in forex, let us consider some examples.

First, consider a trader who has a trading strategy that allows him to take, on average, 30 pips a day from 2 trades in the forex markets. The odds sound good, but when we discover that his actual winning ratio is quite low (only 30%) it becomes clear that most of his profits actually come from relatively few trades.

Thus, his average may be high, but his winning percentage means he will likely go long periods without winning any trades. In fact, on occasion he may go a week, two weeks or even more without making any money. On even rarer occasions, he may even go a month without taking home any profits.

As you can see, patience is clearly required in this situation to wait out the losing periods. The trader knows that if he keeps plugging away his endeavours will eventually turn into cash, but it is all too easy to give up when time are tough.

Let us now look at a second scenario.

Consider a trader who, one morning, puts a trade on his favourite currency pair after spotting one of his best ever trading setups. Now let’s assume that the currency pair starts going the wrong way and the trader starts to lose money.

Somewhat unbelievably, the trade carries on in this fashion and before he knows it, the trading session is near the end of the day and his position is still showing a loss. He’s quite simply had enough by now and closes up shop for the day so he can have some dinner and go to bed.

Of course, you probably know what is coming next, he has just made a big mistake.

Moments after he closes his position, the currency spikes up as the US markets open and a news flash comes out. In a matter of seconds, the trade that the trader just closed for a loss, would now be showing big profits if only he had waited a couple of minutes more.

That is one of the key lessons to be learnt from forex trading. It can often take hours, days, or weeks, to wait for a move that happens in just seconds.

Further reading:  5 most predictable currency pairs