Forex Trading ExpectationsDecember 6, 2016
Forex trading expectations vary from trader to trader and they depend very much on each individual's trading style. Scalpers are having a very short-term horizon in mind for their trades, swing traders are having a moderate time perspective, while investors are looking for the bigger picture and calibrate their trading accordingly.
On top of the things mentioned above, the trading tool used matters as well. Be it a trading theory, or a technical setup given by some indicators. In all cases, patience plays an important role as well.
Calibrating forex trading expectations based on these factors is not an easy thing to do. Some days the market is moving extremely fast, other days ranges are holding amazingly well. However, consistency, patience, and discipline should prevail.
EURUSD Example - Missing Opportunity or Staying Disciplined?
The EURUSD daily analysis you see above is what we've sent to our subscribers middle of August this year. Because the time frame is quite big, our forex trading expectations implied a longer time horizon.
Needless to say that target came three months later, but we didn't let the trade running. After all, we broke the old saying: let the profits run! What a bunch of non-sense!
To calibrate forex trading expectations one should look at multiple factors:
- time frame the analysis is being made on;
- distance price needs to cover;
- fundamental factors that might derail the outcome;
- daily, weekly, monthly fixings, etc.
In our case, it was none of the above. We trade technical analysis and considering fundamental factors as being the reason why the market is moving.
Now that market dipped below our target, it may look like a missing opportunity. In reality, the opportunity cost of being wrong with the analysis and right with the trade is much bigger and cannot be ignored.
As a rule of thumb, time plays an important role in any trading setup. If time cannot be incorporated in an analysis, the forecast losses its value.
Here on Capital Properties FX we strive for incorporating time. As a consequence, as strange as it may sound, we end up most of the times trading time and not price!
Long story short, while the trade above proved to be profitable, even though barely surviving the US election, we did not let it run. We booked profits on those trades as greed is discipline's greatest enemy.
Were we wrong? No, as time invalidated the pattern. Again, time rules!
Capital Properties FX