Lesson 5: Understanding Your Forex Limitations

Lesson 5: Understanding Your Forex Limitations

By: Terry Allen

So, why do so many novices fail to achieve the level of Forex success that they originally thought possible? To begin to answer this question, let us first study the information released by a large Forex Broker that you may decide to use. Many beginners resort to this option soon after they commence trading upon realising the limits of their own knowledge concerning Forex.

These Forex companies issue very comprehensive advice and notifications when the entry and exit points occur of any of the main Forex Currency Pairs. On the surface, their guidelines should work for you because it is in the best interests of these companies that you succeed. Their information is produced by their teams of Forex experts and is based on concepts such as the following:-

1. Risk and Reward Management.
2. Preferred statistical trading techniques.
3. Historical back testing.
4. Pivot points to identity key Support, Resistance and Intermediate levels.
5. Selection of an achievable target.
6. Advise on actions to be taken at each encountered Intermediate Level
depending on the market’s reaction.
7. Stop strategies to reduce risks and losses.
8. Updated advice as the trade progresses.

Sounds great especially as these companies can demonstrate that they
really do make profits from their own Forex trading recommendations over
any given period of time. Unfortunately, a lot can go wrong if you attempt to follow their advice as the following example illustrates:

Suppose your Forex Broker has recommended trading a currency pair with a
100 pip target after analyzing applicable Resistance and Support Levels.
Although this task seems readily achievable, the first point that you must realise is that you may need to trade for many hours before your target is reached. Now, despite the fact that your Forex Trader may be supplying you updates on a regular basis, a large trade reversal could occur suddenly without warning especially in volatile times.

Should this happen, your Forex Advisor could, themselves, respond to this sudden event in a swift and appropriate way. This is because they could well possess an experienced staff that is supported by large supercomputer facilities and is able to monitor each trade using numerous analytical tools and techniques constantly 24 hours a day.

You, on the other hand, will not possess anywhere near their facilities. In addition and as you will need to sleep, you will not be able to monitor trades 24 hours a day just on your own. As such, you may not realise quickly enough that such reversal events have happened and, even if you did, you may not respond correctly because of your lack of training and experience in this subject.

This article is part of a course that is intended to show you how to overcome such problems.