Anyone who has spent a significant amount of time trading forex will tell you that there is no single ‘holy grail’, indicator, method, strategy or system that will get you profitable forex trading 100% of the time. In fact, consistently profitable traders are just as likely to tell you that losing is as much a part of trading as winning.
But as shady brokers like to promote the idea of getting people to open forex accounts and hoping that hope will perpetually populate humans, there is no shortage of trading enthusiasts and professionals alike who continue to believe in the all-for-profit scheme.
Here are three reasons why you’ll be lucky to be the first man (or woman) to reach for the sun rather than find the “holy grail” of forex trading:
1. No one can prepare for all the uncertainties in the market.
One of the advantages of forex trading is that the bajillion factors that move currencies make it difficult for any individual or group to influence price action for extended periods of time.
Unfortunately, this also makes it difficult for traders to predict the future price movement.
Unless you get a superpower that lets you know ahead of time what central bankers and economic influencers are going to say; Being warned of an upcoming natural disaster and terrorist attack, or preparing for similar circumstances, you are unlikely to find the Holy Grail any time soon.
2. People move the market
At least for now. Although mechanical trading systems, in general, have gained popularity over the past few years, humans still control the tides of the forex market.
Human behavior is one of the reasons we still see trading opportunities, as the price does not reflect its value based on available data and current market themes.
Mike might interpret an economic statement in a different light and place orders in the opposite direction to Harvey’s.
Elliot, who is dealing with a corporate account, may hold a losing position instead of closing a losing trade.
Multiply these daily scenarios and we get an unexpected mix of possible price reactions.
3. No strategy is profitable in all trading conditions
Those who have spent some time with the markets know that, like human behavior, there are patterns that tend to repeat themselves on the charts.
The EUR/USD pair may react to the stochastic signals and trade in the 100 pips range for several days. Similarly, AUD/JPY can be counted on to bounce lower from a retest of the 100 SMA.
But what if the pattern ends and the price moves to another pattern?
For example, EUR/USD might suddenly break out of its range and keep the stochastic in the overbought zone as the pair turns into a trending mode. Stochastic, which used to be reliable, is now useless while trend strategies start to pop up again.
Most trading systems only work well until the price changes into another pattern. Constant shifts in trading conditions and the unpredictable timing of their occurrence make it difficult for traditional technical tools to be reliable all day every day.
It takes discretion to spot shifts in patterns and to determine which strategies will turn a profit.
Just because you don’t have the Holy Grail doesn’t mean you can’t be profitable in forex trading. There are people who are able to trade full time and more who are part time traders and are convinced that they are consistently profitable.
The key is to control your risks. Since you can’t get rid of them, the least you can do is 1) fully understand how margin trading works and 2) learn proper risk management.