If you are passionate about forex, and closely follow the markets on a day to day basis, the chances are that you might have come across a frequent pattern of being shaken and perhaps spooked from your positions or your analysis.
Pardon the cliché, but to quote John Maynard Keynes, “The market can stay irrational longer than you can stay solvent.â€
This is a common phenomenon that occurs frequently and depending on your trade exposure and/or your level of conviction; it can certainly impact your psyche as well. There are days in every trader’s career when the markets make you feel like dumb and at times lead you to question your abilities.
But fret not, as you are not alone when this pattern occurs, and you can break out of that sour feeling it leaves you with.
Can you relate to this cycle?
On closer observation, traders will notice that there is a recurring cycle.
It typically starts with either a random discovery or finally spotting a trading opportunity, which usually results in profit. This obviously evokes the curiosity in you, leading to a further analysis of the asset or instrument in question.
There are times, sometimes prolonged periods of times when you are absolutely locked in on an asset. You are able to pick the turning points quite nicely, to the point that you could accurately tell where the next intraday reversal might happen.
What follows later is a string of really good trades, which starts to boost your inner confidence. This could lead some traders to a sense of complacency which is usually the start of the shake out. From a trading perspective, your complacency could lead to scalping for a few pips within the larger price action or leaving your stops a bit too wide, knowing certainly that you are in sync with the markets. Of course, what could go wrong? You’ve been watching the price action, and you have the pulse on the fundamentals, you certainly know what you are doing.
When the market shakeout starts, it typically results in a strong price action, leaving you perplexed. You might start to doubt the price action itself, leading some to continue adding to their positions, despite the market moving opposite. This is also referred to as being married to your position or adding to losing trades.
