Confusion in Forex! Everybody tells me to do something different!

Why aren’t traders buying the same things?

At any time the market has buyers AND sellers, and they can’t both be right, right?

Well, yes and no. Everyone has their own strategy; and while probably if it goes up and you are short, you are losing, people trade on different time frames and with different goals. So, while some people are definitely wrong, it’s not always the case that if someone has a trade going the other way, that they are going to take a loss on that trade in the end.

But what if my trader friend tells me to short, and I think it’s long?

We really need to ask ourselves some questions here:

Firstly, am I wrong? Is that trader using the same tools as me and drawn the opposite conclusion, or seen something I have missed?

Is he wrong? (has he missed something)? Can I even understand his trade — if not, why not?

Does his trade idea help me make any improvements or amendments to my trade? For example: Has he spotted some heavy resistance I have missed? Is the movement running out of legs? This information might help you adjust your take profit or stop loss.

Am I still confident in my trade? Look, at the end of the day you can’t blame “Trader X” for giving you a bum trade. The buck stops with you my friend, and you have to own that. If you still think you can trade your trade plan without messing it up due to your emotions, then that’s great. On the other hand, if you are still second guessing yourself, look at the next trade entry, there’s a ton of them every day.

We have to remember one thing: Nobody is right, or wrong, until it happens. Nobody knows the future, we just analyse the market and take a shot at following it.

Here we might think that it’s a good time to sell, as the pound is going up and should move down, right?

A lot of my students say “buy low, sell high, right?”. Once again we don’t know the future, what is low and what is high? The only fairly concrete answers to that are “all time” low and high because as the pictures here demonstrate, we can be low and high all at the same time.

We see that in fact our price is historically very low, and probably has more upside than downside over the long term.

You can see why someone might want to buy or sell the same pair through these pictures; one may be long term and the other short term or one may even be banking on a reversal and the other on a trend continuation.

Andrew Davies

Education Manager at GSI Markets

www.gsimarkets.com

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