Forex Educational – The Time Forex Market Proved Everyone Wrong
Skerdian Meta • 3 min read
I have been intending to write this article since the US presidential elections, but everyday forex events, market analysis, and andropause have kept me from getting into it. I want to talk in this article about how we can still make money in forex even when we are wrong.
We are not wizards so we cannot predict the market every time it decides to make a move. We compare the odds for and against a direction and if the odds are higher, then we open a forex trade or a forex signal in that direction. That´s all we can do; conduct the fundamental and technical analysis and calculate the odds.
Of course, you cannot get everything right. However, we can play it right. Just like in a poker game, you can´t pick your cards but you can pick your bluffs. Playing the forex game right is no bluff by any means, but that´s the concept in general. In a simpler way, if you chose the entry and exit levels correct, then you can still make it even in times when you pick the wrong direction.
That was the case with EUR/USD last month. Every poll showed Clinton ahead in the US presidential race and everyone saw the USD higher in case she won. Alternatively, all forex traders, financial analysts, and everyone else in the financial industry strongly agreed that the Buck would lose half its value if Trump won.
Well, Trump did win in a surprise victory and it didn't take long for the market to prove everyone wrong. This was one of the rare occasions when all economists and analysts were completely wrong and they don´t like to talk about it. I have been looking for more than a month for apologetic articles admitting we were so wrong, but not much luck.
Trump kept signalling us all the time, up up up
I will be one of the first to admit that the political analysis led every trader to the wrong conclusion; the Buck would go bust if Trump won. Economists and politics don´t bode well together, so that takes some of the guilt off our shoulders. In our case though, we came out on top even though we were wrong.
That´s the most important thing for a forex trader and we will post an article about how we can still make money in forex even when we are wrong. But the problem here is our failure to foresee this USD strength. It looked unexpected but it really wasn't.
We knew that Trump would come with less regulation, lower taxes, and more government spending as fiscal stimulus. He had emphasized this during the campaign, yet everyone failed to see it. Why didn't we see it coming?
The answer is fear; fear of uncertainty. Of course, there´s lots of uncertainty surrounding controversial figures such as Trump, especially when it comes to global trade as he has often commented. However, that´s a long term event and even so, that would be a positive factor for the Buck. Yet, the fear of the unknown is too great to overcome for human psychology.
Often, the fear of the unknown leads people to make irrational decisions and that was exactly what all this nonsense was, an irrational decision. I mean, we had everything laid in front of us, yet we failed to see it. At least we received a good lesson which brought all analysts back to their senses. The important lesson here is, trust your gut feeling but don´t let fear (or greed) cloud your judgement. Put some trust in your analysis, that´s the reason we do it.