The challenge of forex trading and why I trade

The Challenge of Forex Trading & why I Trade

This is an avatar image of the blog author Ash Dunbabin

Forex Trading is different, you apply some analysis and put your money on the trade, this is where forex differs from gambling. People argue that you do the same on the roulette wheel, you do some research - i.e. you look at the numbers that have come up over the last few spins, you calculate the probability of your number or colour coming up this spin whether consciously or not, and then you act accordingly and put your money on the table. Then attendee spins the wheel and drops the ball. What most people think is that you can have a 50% chance of winning (red or black), except there is one issue with that logic - the number 0. What this number effectively does is swings the probability back in the houses favour. The house (casino) knows over a large enough sample size - i.e. spins, the house has the statistical probability of being in front - for every $100 that is put on a roulette wheel, the probability works out to about -$2.70. Take that to $1 million, or $1 billion and that is why casinos are some of the largest and lushest buildings littering our capital cities around the world.

With Forex Trading, you do some analysis on a currency pair and you place your money on the trade. This is where it differs from gambling. In Forex Trading, if you are managing your risk (and you should be), you will typically have a stop loss set. Most teaching schools suggest only using 1% - 2% of your available account for any trade. This way, when probability is not playing out in your favour, you can stay in the game long enough for when probability swings back in your favour. This might seem a little like gambling, and many people make the argument that it is, but they forgot, someone who is trained in Technical or even Fundamental analysis is thinking in probabilities.

For example:

‘This double top that is rejecting this key resistance line is a signal that this pair is about to go short’.

This is called an edge. The probability comes into it from your backtesting. You can look over the past 12 months, 24 months, or whatever timeframe you like and see how many times price has reversed off this resistance line and or structure. This is probability - not gambling. The two are very different. Furthermore, once the trade is live, although you do not have any control over where price goes, you do have control on when to exit your trade. You can exit it 0.5% up, 0.5% down or anywhere else in-between - at the casino, you have no ability to do this.

People also say that Forex Trading is a Zero Sum Game and that it is somehow dirty because of this. Yes, Forex Trading is a Zero Sum game. For you to make money, you have to take money off someone else. Some would also say it is a negative sum game given that you have to pay spreads to your broker. This is true enough, however, I look at spreads as a cost of doing business. The other issue people bring up against forex trading and that big traders can manipulate the markets. Maybe this is true for a few players out there, but about 5 Trillion dollars is exchanged on a daily basis on the forex market - you would need to be pretty bloody big and take some pretty huge risk to move the needle in your favour so this is unlikely.


Why do I trade?

So why do I trade forex? The obvious answer most people will arrive at is money. This is true, there is the money element. If you do a search on Instagram or Google, you will come across young seemingly cocky 20 something year olds wearing Rolex watches, driving Lamborghini's and posting pictures depicting them dropping huge wads of cash onto a laptop showing forex charts. This appeals to a certain demographic, those in deep debt for example looking for a way out of their misery, and also those who have not developed the mindset of not allowing greed to control their life. But for me, it goes deeper. Sure, I would like a Breitling Watch, I would love a Lamborghini, but for me, these are all momentary passing pleasures. For me, money is a poor motivator and it comes down to what a person really values. For me, my highest value is time. Out of all the abilities and resources a person has at their disposal, the one constant every human on Earth is equalised by is 24 hours - and there is a catch to this as well, no one knows how many of these 24 hour blocks of time they have. So for me, I value my time over money, possessions, glory - everything.


How does forex help.

One thing forex does allow a person to do is potentially buy back their life - their time. Forex Trading has the potential to allow you to generate an income from anywhere in the world with pretty much any ability, account size and even intelligence. All you need is a laptop, a willingness to learn, and a desire to grow as a person - you will seriously need to challenge everything you know and have been taught. Now, I caution those that think all they need to do is to spin up an account with a few thousand dollars in it, and bamm, in two months you can quit your job and live off forex forever - it simply does not work like that. There are a few unicorns that do achieve this but they are rare as rocking horse shit. For the typical Forex Trader, myself included, this is a long journey of success, failure, more success, some more failure and hopefully a breakthrough. Because forex trading forces you to grow as a person, you quickly learn that most of what you learnt at school & university is pretty much useless.

You also learn that almost everything society suggests that you do is also counter-productive. For example, society dictates (well at least in the West anyway) that you need to be nice to your parents, work hard at school so you get good grades so you get into a good university, work even harder in university so you can get a good job that pays well, then you should find a nice girl / boy or whatever your preference is so you can then buy a really big house, have 2.3 children and teach them the same bullshit you were taught so the cycle can continue. Fuck that. The reality of this life, this Western life trajectory, it never makes anyone truly happy. Family and Children are a very important part of being happy, but the really big house, the 9 - 5 that you hate and the stupid liability that you drive thinking it is an asset to that 9 - 5 each day no matter if it is a Porsche or a Ford does not make one happy. No, the only thing that really makes a person happy is time. Having the time and the power to decide what you will do with your day.

Forex is not a magical silver bullet to happiness either. In fact, it can stress some people out, especially those who have decided that their entire income will come from Forex. I have a rule that no more than 20% of my income should come from Forex. The best part of forex trading is this - it forces you to grow as a person, to read, to challenge everything, to challenge how you do your finances, to do things in a different way, to invest. If you always do what you have always done, you will always get what you have always got. Forex grows your mind, and your world.