Trading is not predicting

Most new traders think they need to become some sort of a wizard and predict what the market will do. This strategy is doomed and will fail because it’s like trying to predict the future. Unless you have a time machine, I can only wish you good luck.

Trading itself is so difficult because it goes against everything we have learned so far – you need to get used to lose a lot, you will be wrong many times but – and that part is really important – you don’t need to know the right answer.

While it is true that traders often have opinions about which currency pairs are likely to rise or fall in value, these opinions are based on their analysis of the market and their edge and are not predictions. In fact, the very nature of the market makes it almost impossible to predict with certainty what will happen to any particular currency pair in the future.

So, if trading is not about predicting the future, what is it about? At its core, trading is about managing risk and making informed decisions. This means that traders need to be monitoring the market to identify opportunities and make trades that are likely to be profitable. Which trades are these? This is where your edge comes into play – you need to have a tested system, that you have developed yourself (yes, copying someone else will not work in most cases) and execute once an opportunity presents itself.

In summary, while it is easy to see why many people might think that trading is all about predicting the future, the reality is much more complex. Instead of trying to predict you need to take calculated bets, with sound risk management, which have a statistical advantage in your favor. By understanding this, you make the very first step towards actually becoming profitable (spoiler alert, it will still take months or years until you really get there).