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EUR/USD (Forex): And So, We Wait
Do you have the discipline to stand aside for days between forex trades?
Trading the EUR/USD has not been easy lately. The exchange rate between the euro and the U.S. dollar (the most widely-traded currency pair) hasn't made much net progress, but it's made up for that in spades by choppy, volatile, sideways-moving market action.
When the going gets tough, the tough get going, right? Before you say yes, read these thoughts on the business of forex trading by Jim Martens, EWI's Senior Currency Strategist and editor of EWI's trader-oriented Currency Specialty Service.
Most traders, even the best ones, are wrong more than they are right. I would go even farther and suggest that a trader can win with only a 33% success rate. The key to that is sound money management.
A huge part of that is teaching ourselves to wait for days when the market's likely path is clear -- and act only then, aggressively and with confidence. And when Elliott wave patterns are unclear, we would sit on our hands, or turn our quote machines off.
To do this over a long period of time, you must have discipline. Be honest -- could you stand aside for days (or maybe weeks!) between trades? Could you leave your funds sitting idly in your account and not risk it to satisfy the need to be part of the "game?" You know it would reduce your stress levels. Besides, statistics show that in equities, for example, a few days' worth of trading can make the difference between long-term success and failure. Remove those days, and profits from equity trading go mostly flat.
If that's true, why shouldn't we treat currency markets the same way? Why must we act every single day? Wouldn't it be best to wait for those rare, but perfect trading moments when the Elliott wave picture looks clear? Why not teach ourselves to wait for those high-confidence situations when you know exactly at what price point your outlook is wrong, and when the potential reward outweighs the risk by multiples?
Most forex traders will shun this approach because it means spending a lot of time watching and not participating. Simply put, it takes all the fun out of it. It would turn what we do into a business, stripping it of all its entertainment value. I doubt many of us are wired the right way to watch rather than act. Could you do it? ...JJM...
These thoughts are more than relevant now that we watch the EUR/USD "stuck" near $1.47. But we shouldn't have to sit on our hands for much longer. In his Sept. 17 Currency Specialty Service daily EUR/USD forecast, Jim says: "The question is not if the euro will peak, but when."
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