Forex trading is a world of uncertainty. No one can predict the market with 100% accuracy unless we invent the time machine to go forward in time! But we human beings are wired to dislike uncertainty and always like to control things. It is the human being’s desire to have everything under control which has led to so many discoveries in the field of technology. Because of that, uncertainty in the Forex market can be terrifying and dealing with uncertainty in Forex trading is a huge challenge. Here are some ways to deal with uncertainty in Forex trading.
1. Get used to uncertainty
To stop the fear that you are experiencing from something, you need to get more exposed to the thing which makes you scared in the first place. A new territory no longer feels strange once you get used to it. So, a simple way to deal with uncertainty is to trade regularly and never give up. Once you have good trading experience for 6 months or a year, uncertainty in Forex trading will not cause as much problem as it causes in the beginning. People say that time solves a lot of problems. Just by the passage of time, you will have more courage to face uncertainty in the Forex market.
2. Accept the Reality
Raymond Dalio, an American billionaire investor, hedge fund manager, and philanthropist, once said, “No matter how hard you work, you can still be wrong.” As of June 2019, Raymond Dalio is the 58th wealthiest person in the world according to Bloomberg. But such an experienced and rich investor says that he can still be wrong. Even after working in this field for over 35 years, he still says that there is no holy grail or a magical solution in the market.
Both new and experienced users feel the factor of uncertainty in forex trading alike. But the new traders tend to fight with it while the experienced traders accept it as a reality. For every loss, new traders may feel unhappy and miserable. But understanding that the losses are normal and being ready to lose is the attitude which gives you an edge as a trader. Be ready to lose and be ready to be wrong many times. The sense of acceptance always reduces the severity of uncertainty in the market.
3. Use all the available tools
Forex traders can analyze the market in so many ways. You can anticipate the movement of currency towards a certain direction following an important news release. Also, you can use technical tools like support and resistance or moving averages to come up with a deep analysis. You can also watch the market sentiment and get an idea of how the prices may change. But we often see traders asking questions like, ‘Which one should I choose, fundamental or technical analysis? They ask this question with the assumption that a trader should choose any one type of analysis. But taking advantage of all three types of analysis can make your predictions more accurate and reduce the uncertainty in Forex trading. So, if you are not strong in one of these three, take your time to learn and practice it.
4. Be prepared
Since Forex is a business, each decision you make in the world of currencies requires a lot of planning. You have to know what kind of strategy to choose during different market conditions. You need to test your strategies very well, see their pros and cons and apply them during the right time. Let us say college examinations as an example. You would never know what you are going to see in a question paper before you enter the examination hall. It is completely uncertain. But if you are prepared well, the uncertainty doesn’t look like a big problem.
First, you need to distinguish between what you can control and what you can’t when it comes to the Forex market. A lot of things are beyond control but there are a few things which you can certainly control. For example, if you follow good risk management, uncertainty in Forex trading may not scare you much. There is a proverb which goes like ‘Hope for the best, but prepare for the worst’. The worst thing that can happen for you in a trade is a loss. If you are prepared to face the loss, then uncertainty is no longer a problem. If you do your homework every day and do a thorough analysis before and after a trade, dealing with uncertainty in Forex trading is not so difficult.
