Hello and welcome to Trading The Odds. Here I will try to give you your first insight into The Forex Market and explain to you what I mean when I say: trading is about Odds. For those of you who automatically get that uneasy feeling in the pit of your stomach wondering if it means that trading is really a a sort game of sheer luck – breathe in, breathe out 😉 – it is not a game and it certainly doesn’t have much to do with luck. What am I trying to say? Well, follow me:
What does that even stand for? The “Forex” market stands for Foreign Exchange market: a financial market where people and institutions exchange one currency for another, for example the US Dollar $ against the Euro €.
The foreign exchange market assists international trade and investments by enabling currency conversion. For example, it permits a business in one country with a specific currency to import goods from another country with a specific but different currency, and pay in the currency where the goods are imported from, even though its income is in its own country. Very interesting, but do we really care? More importantly, the Foreign Exchange market enables us to directly speculate on the value of currencies relative to one another, known as the Exchange Rate. And that is what all Traders, and now you as well as a part of the community of Female Forex Traders, aim to do. You don’t want to concern yourself with international Imports/Exports; you want to make a profit. For some reason, most women find that hard to admit, as if making Money was something despicable a lady doesn’t do. Well, this lady here does it and there is absolutely NO REASON WHATSOEVER why you shouldn’t as well! Making money isn’t dirty. It’s sexy, and it’s cool, not to mention tremendously satisfying!
Here are some additional characteristics of the FOREX MARKET:
- its the largest market compared to any other exchange market, like the stock or futures markets, resulting in huge trading volumes per day, providing good market movement
- its Opening Times: 24 hours a day 5 days a week, trading starts at 22:00 GMT on Sunday (opening of Sydney) until 22:00 GMT Friday (closing of New York)
- given its global character, a multitude of events anywhere in the world can affect exchange rates and thereby create movement again
- it is characterized by the use of leverage to enhance profit and loss margins with respect to account size, enabling us to start off with small accounts and either earn a nice income or loose your money really fast…:-) (which, when you start with a really small account won’t have much of an impact on your finances at all)
For those of you who crave more in-depth knowledge as to what FOREX is, I would like to refer to another website: Basic knowledge on the Forex market.
Now, do I personally think you need to have this deep almost scientific understanding of what the Forex is? No I really don’t, but I have been where you are at now and I get how you may want to amass some further Knowledge. So, if you feel the need, go ahead and knock yourselves out 😉
Trading The Forex, Trading The Odds
As mentioned above, we as traders, speculate on changes in exchange rates between different currencies. For instance we, for whatever reason, anticipate that the US dollar (USD) will rise against the Japanese Yen (JPY). The USD/JPY is then the currency pair you are about to trade. Since you think the USD will rise in value compared to the JPY, you would place a BUY order and wait to see what happens. If you were right on your analysis, the USD will indeed rise compared to the JPY, the exchange rate for this currency pair will go up, and you will make a paper profit.
Unless you sell your market order, it will stay paper profit. After selling your “buy order” to another participant in the market, your paper profit turned into a real profit and your wallet gets filled. It really is that simple!
The odds that you were right on your anticipation depends entirely on the moment, your strategy, the other participants, how they trade, their strategies applied and so on. So you may wonder: Is Forex trading nothing more then putting in a trade and hoping for the best? That would certainly make you a gambler, wouldn’t it. Let me clear here: If you trade without a strategy, if you jump the gun without a valid signal, if you basically don’t know what and why you are doing it – if you’d answer all of those with “yes” then yes, sister, you are gambling!
If, however, you have a strategy, consistently take your trades according to your strategy, and do this over and over again – that will set you apart from all gamblers in this odds game and make you a real-life bona fide honest-to-God trader!
What Are The Odds?
It’s time, ladies, that I started to explain “the Odds”. I take the liberty to use examples of Mark Douglas, a former coach on trading psychology and in my opinion a must-read and watch (Youtube) for every trader regardless of whether you are a beginner, at an intermediate level or a seasoned advanced trader.
Say you are playing the slot machine, what do you expect to happen once you pressed that button or pulled the handle? You expect an outcome. You win or you loose. There is no analysis nor a strategy how to pull the handle, you just put in your coin and wait for the outcome. This is gambling at its best.
Now, take a coin, a weighted coin to be exact. The coin is weighted to the head side and you know this. If you engage someone in flipping this coin with you, you’ll know that head will come up more often than the tail; what you don’t know is at what sequence. So, while you are playing this flip-coin-game, will put your money on head every single time, knowing that in the long run, head will come up more often than the tail. Simply put, more often than not, you WIN.
This is exactly how a casino works. They don’t have weighted coins I suppose…:-). But every single game in a casino has a little advantage in favor of the casino. So when people keep on playing, the casino will definitely loose money, but in the long run they make more then they loose.
Where am I going with this? Well, sisters, in the world of the forex market you have to be the casino instead of the player. Unless of course if you are a professional gambler 😉 not a clue how they do what they do, but I sure as hell know they have an edge! So, you, too, need to have an edge or strategy that places the ODDS in your favor while participating in the Forex game.
The analogy with the coin is actually quite a perfect one. It becomes clear that over a series of flips you will turn out to be the winner, but it also demonstrates that you can’t be picky. You have NO clue when heads will come up, there are too many variables you don’t have any influence over. And that’s assuming that you would even know all the variables that influence the outcome! That would be …. rather impossible. The good news is that its not necessary to know in order for you to end up winning more than losing – as long as you stick to your strategy and thus put your money on heads EVERY SINGLE TIME!
Then how does this relate to trading on the Forex? I’ve hinted at it already; it’s as simple as this: based on your strategy or edge, you have your weighted coin in the market. The strategy you choose gives you the better odds when placing your trades. Does this mean you will come up with a strategy that will let you win every single time? Hell no 😉 NO ONE has a strategy that wins every single time.
Remember, there are a lot of traders who have an edge that will make them loose more trades than they win trades, and yet they make a profit – but more details on this will be available later 😉
For now, please let go of the illusion that there is any strategy out there, no matter how perfect it seems, that would make you win 100 % of the time. Please watch out and don’t fall into the trap of sellers who Claim they have mastered that holy grail – it is mathematically impossible.
Say your edge (I like that word better than strategy because your strategy is more then just your edge) places the odds in your favor, say on abase of 55%. This means that after placing 100 trades according to this edge, you will win 55 of them and you will loose 45 trades. OMG, really? Will I loose 45 out of a 100 trades? Yeah, you will and even more, because you will probably make some trading errors, too. But don’t freak out now – we have all been there…:-)
In summary, when you find a good edge that places the odds in your favor, you stick with it and place your trades according to it EVERY SINGLE TIME. If you do this over a series of trades, you will actually become a consistently profitable Female Forex Trader!
Then I would like to invite you to keep on reading and stay tuned.