Forex Trading Online: Expectation and Reality

Entering the world of forex trading online is often paired with dreams of easy profit and fast success. A lot of newbies consider the opportunity to double or triple investments within weeks. Reality, however, is usually far from such expectations, as there are market fluctuations, unexpected losses, and the need for the skillful strategy is a must. One of the significant reasons for dissatisfaction with trading is high expectations. The understanding of when to properly realign expectations with reality would be tremendous in trading.

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The frustration created by unrealized expectations in the online forex market often results in bad choices, which subsequently ends with financial disaster. Most new traders go wrong believing that a trade is bound to be a winner or that they are superior to the market and could consistently beat the market. That kind of mentality may result in excessive trading without proper planning and eventually leads to massive losses. For most people, it isn’t the strategic system used but rather the inflamed sense of expectation laid on themselves.

2 General Kinds of Unrealistic Expectations:

1. Expectations of trading – This generally includes beliefs such as investing several hundred dollars in hopes that it will grow into thousands or even millions in a matter of weeks or months. While some professional traders succeed tremendously through their knowledge and good risk management skills, starters do not. Unrealistically high expectations usually lead to poor choices and, ultimately, a depleted trading account.
2. Expectations in trade: These arise when a person goes into a trade with a view that it shall shortly shift to his advantage or that a small investment becomes large gains within a short time.

A typical example among such unqualified expectations consists of an inexperienced trader risking a large part of his or her capital in one trade, hoping to gain much. A high hope of fast monetary gains might inspire the trader to be blind to important issues such as risk management and a potential cause of severe loss. The danger lies in the assumption held by novices that a small amount of investment can become massive fortune within a few trades, often ending in disappointment and frustration when the market does not behave as expected.

Keeping Expectations in Line with Reality

Fortunately, there are quite a few ways to reconcile one’s expectations with the actual conditions of the forex market. Here are several strategies aimed at helping traders maintain a balanced perspective:

1. Lower Your Risk

One must always try and reduce the risks, especially for those beginners in online forex trading. While the risk of much larger trades to return more significant amounts is tempting, risking a minimal percentage of your capital on each trade may go a long way toward locking in potential losses. There are many advisors who give arguments for limiting individual trade positions to 1% of an account’s total balance, thus preventing the possibility of huge losses. This cautious risk management technique may lengthen one’s stay in the market, allowing experience to be gained without using up one’s account base.

2. Consider the Worst-Case Scenario

A very effective approach in terms of keeping expectations realistic is by creating an attitude to perceive and anticipate setbacks.

Approaching each trade with the assumption that perhaps it will end up being a loss might end up positive when it becomes profitable. Also, it makes one keep his or her doors and windows wide open to the varied possibilities of the market. When you are analyzing technical indicators and trends, a cautious attitude can help you make rational decisions, thereby reducing the pressure of winning every trade.

3. Keep Working at Your Day Job

One good strategy for coping with high expectations is to make a part-time forex trader and maintain the steady flow of income from regular employment.

Spending all day watching market movements creates unrealistic expectations and increases emotional involvement in trades. Maintaining a day job helps diversify income streams and eliminates the idea of always making money off every trade. Trading in part-time allows one to gain a perspective for forex trading that’s vital for both risk and emotional response management.

Managing one’s expectation with reality is very important in your success in forex trading online. New traders should put the time and effort to practice different strategies that best fit their trading style instead of relying on luck. Unmanaged expectations are common pitfalls that cause traders to lose sight of what they want to achieve. Such pitfalls are prevented if traders can anticipate losses from time to time, and keep their risks low, while maintaining a day job. A balanced mind-set helps traders prepare for market ups and downs; thus, paving the way for steady growth and much success in the long run.