Why Going Against the Grain Is Important In Forex Trading
We are conditioned for the most part to follow the leader and go with the flow in most things we do. The more something becomes popular, the more everyone gravitates to it.
But in the world of currency trading, being part of the herd and sticking with what everyone in the herd does is likely not going to get you anywhere. Market positions become ultra competitive and the ability to make money in what was a profitable market position gets quickly destroyed as the herd descends on the opportunity.
That’s why in trading it’s good to be able to go against the grain as a currency or forex trader and swim up river when it makes sense to. Yes, there is value in following a trend that others are following, but make sure you don’t follow them over a cliff.
To be more specific, currency trading is all about following trends. The market goes up, and the market goes down. The key though is when does the trend change direction and are you going to be in a position to profit from it, or are you going to wait until everyone else moves before you do, leaving you with the table scraps to profit from.
By being able to identify those points in time when the trend is likely to turn and then acting on your assessment, you will end up going against the flow and that’s how you’re going to start to make greater profits.
Let’s use an example to further illustrate what’s being said.
A trader is looking at buying EUR as it starts to get close to 1.3 USD per EUR, which would represent the lowest point its traded at in ten years (according to this example). The Euro has been dropping and trending down so everyone is selling off their positions leaving you with an excellent opportunity to buy Euros at a great price. Yes, the currency may go lower and put you in a loss position, but eventually it will recover and you will be in a strong position to take a healthy profit, but you’re going to have to go against the grain to do it by buying when everyone else is selling.
The top traders develop the ability to spot or predict when the trend will turn and have the courage to act on their predictions. There is definitely more risk in this approach, but also more opportunity to make serious money.
But if you want to break out of the herd mentality and have the opportunity to make larger profits, then you have to be prepared to swim against the current. The key here is to obviously make good calculated decisions based on your study of the market. And by taking this approach, you’re going to miss sometimes too. But if you want to become a top notch forex trader, then you’ve got to figure out how to go against the grain both in terms of solid market knowledge and your own person courage.
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