The Illusion of Control in Trading


There are very few things in life that we can control entirely by ourselves. We can eat only healthy food and still be overweight or ill. We can drive safely and still get hit by a drunk driver in the opposite lane. We can study hard for tests and still fail – or barely study and ace them. The same is true when it comes to Forex trading; we may think that we’re in control, but the truth is, the trader controls very little when it comes to trading. It’s all an illusion.

Focus on what you can control

Even an inexperienced trader should know that the markets can be random at times, and even when they aren’t, there can be sudden headlines that causes the market to move dramatically without warning. Similarly, a sudden market movement can reverse without warning. There is little that any individual trader can do about these instances. What we can do, is focus on what we can control.

There are only a handful of things that you have full control over when trading. I’ll outline them for you here so that you can fine-tune your trading strategy and manage your risk in a better way.

Entry and exit times. One of the most obvious ones is when you are in or out of the marketplace. After all, there is nothing that says you have maintained open positions at all times. If you find that the marketplace is very difficult to read or understand, stay out. It’s that simple. After all, there’s no point in risking money in a scenario where you have no idea which direction you should be trading. And this you can fully control.

Stop loss. Only you decide where that stop loss should be placed, and whether or not it is still valid. By sticking to your stop loss levels, you can eliminate a lot of heartache when it comes to trading. After all, stop loss isn’t necessarily a failure, it is you recognizing that the trade isn’t panning out the way it should have. At that point, you recognize that it is better to cut your losses and live to fight another day.

Take profit orders. Orders to take profit are something that traders can control even after they enter the market. If you have a level that you think the market is going to aim for, and you have the take profit order there, you can (I mean should) just let the trade ride. Unfortunately, far too many of us worry about the market pulling back after we have started to make a bit of profit, which is simple human behavior. The fear of loss consumes us, especially when it could happen so rapidly. If you stick to your take profit targets and don’t let your mind convince you to change them, you will hopefully end with more profit than you would if you sell before you hit the target.

Trading psychology. Let’s be realistic – it’s hard to control what you think or feel. Nevertheless, I would like to think that with proper training we can control our trading psychology to our ultimate benefit. Your inner voice will likely try to convince you to make changes to your orders or trading strategies for the hope of achieving better results. But one of the most important ways to control your trading is to not let your inner voice mess with your setups. Trading, in my opinion, should be scientific, not based on emotions or other psychological influences. Take time to learn about trading psychology and to teach yourself how to resist the voices that tell you to abandon your proven strategies.

Learn to accept what you don’t control

We’ve just established that there are many things you can control when it comes to trading. But there are also many things that we cannot control, and it’s important to accept these things as part of the trading process. You cannot control news events. You cannot control the way the market reacts to news events – sometimes things move exactly opposite to what you’d expect. Likewise, even with the most advanced charting tools, the market may move in an unexpected way. Forex trading, like all forms of investing, should be based on science, but it isn’t an exact science. If it was, everyone would be doing it and earning a fortune, and nobody would need to pursue any other means of income.

The truth is, you’ve got to put your faith in your system and understand that it won’t work at all times. And that’s ok. The most important thing is to keep on top of things you can control and use your best research and methods to build a system that will work well, even when you’re not totally in control.

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