One of the most amazing things I’ve discovered is that most amateur Forex traders believe that Forex trading results are not random, yet they can’t seem to produce consistent profits. Shouldn’t a non-random market produce consistent results and a random market produce inconsistent results?
What those new Forex traders don’t understand is; Events with probable outcomes can produce consistent outcomes. Experienced traders treat trading like a numbers game, which is similar to the way casinos and professional players approach gambling.
To give you an example, let’s take a look at the game of poker. In poker, the casinos have approximately a 4.5% advantage over the player. This means that, over a large sample size, casinos will generate net profits of $0.45 for every dollar wagered on the game.
4.5% may not sound like much, but let’s say a total of $100 million is wagered collectively at the casino over the course of a year. The casino will make a net profit of 4.5 million!
All professional Forex traders understand that each individual trade is unique, where the outcome is random relative to the last trade or the next trade. New Forex traders should know that on each individual trade, there will be a random and unpredictable distribution between winning and losing. But on a collective basis the opposite is true. If a large number of transactions are executed, patterns will emerge that will produce a consistent, predictable, and reliable result.
Now, let’s delve into the psychology of how new Forex traders can be successful in producing consistent results by applying the following simple beliefs. First of all, they need to know that 2 levels of aligned beliefs are required to produce consistent results in a random situation.
At the first level, they must believe in the uncertainty and unpredictability of the outcome of each individual trade. At the next level, they must believe that the outcome of a series of executed trades is relatively safe and predictable. The degree of certainty is a function of how good your edge is.
It is the ability to believe in the unpredictability of the forex market and at the same time believe in the certainty of the outcome when executing a series of trades that makes an individual Forex trader successful.
The belief in the uniqueness of each trade prevents experienced traders from indulging in the futile effort of trying to predict the outcome of each individual trade. Experienced traders have learned and fully understand the fact that they don’t know what will happen next. The most important thing is that they do not need to know to earn money constantly.
When you don’t have to know what’s going to happen next in Forex trading, you don’t put special emotions into every trade. In other words, their involved egos will not get in the way of trading effectively.