Forex Trading Blog | Emotion/Facts

This is the second installment of our 2 part article series. This forex trading blog post is going to discuss the difference between trading on facts and trading on feelings. The forex trading blog post will discuss why facts are so much more important to know rather than trading on “emotion”.

Our forex trading blog discusses many topics, however we have yet to talk about trading on facts vs. emotion. The best way to describe this has to do with sports betting. This comparison directly coincides with forex trading, as the same belief system can be applied.

Let’s say that you favorite team in the NFL is the New Orleans Saints. They have had a great year, and with a little luck they have made it to the Super Bowl. The only issue is that they are playing an undefeated team. The day before the Super Bowl, Drew Brees tweaks his ankle in a roller derby deathmatch accident. It turns out he cannot play in the Super Bowl. Although you know this you still think that they will win and put $20 on the game.

Why? Because you have followed them since pre-season and you still think that they have the heart/stamina/and skill to cause the upset. Not only this, your whole family are Saints fans and they would NEVER go against their favorite team. Well it turns out that they got slaughtered by 27 points and you lose your money. Now… believe it or not this happens quite frequently with first time sports gamblers. This same belief is also carried into forex trading.

Although you are analyzing the charts, studying the news and doing all your due diligence, you still think that XYZ currency is going to tank. 90% of the analysts think that this currency will have a 15% increase in value within the week. Even though that the FACTS are saying out outcome, you still trade against the currency. Why? Because you might have heard your buddies talking about it over a beer, saying how they “know a guy” who knows that it will decrease.

OR, maybe there has been a negative factor in your life that has contributed to this belief. Maybe you just lost your job printing the XYZ money, and you have to go on welfare. While going to the store, everything seems to be more expensive now that you are penny pinching. Your venti Starbucks coffee’s now seem like a luxury, rather than a necessity when you had your job. After 2 months of looking for a job with no luck, you soon start the fume! “This economy sucks, and the currency will tank!!!” you scream while slamming your hand down on your IKEA table. Your cereal goes flying but you don’t care!!! You then go on your forex trading site and bet against XYZ only to lose more money.

Although this might be a very strong feeling, traders must look at the facts before anything else. Don’t let an isolated occurrence change the way you look at the facts. Our forex trading blog will have a few more articles about this, but this is just to get the ball rolling.

Here is a link from our forex trading blog to the 1st of the 2 part mini series.

“Forex Trading Tips | Initial Investment“

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