Technical Analysis

Learning from the Past and Technical Analysis

After reading many forex trading blogs on forexsignal30.com, you are probably familiar with various scenarios that may arise when entering the market. However, for some reason, you may still be caught off guard by unexpected events. Don’t worry, even seasoned traders can be at a loss when facing unexpected events in the forex market.

Winning traders and losing traders are distinguished by how they respond to unexpected events in the forex market. To prepare for surprises in the market, traders need to learn price movements in the past, candlestick patterns, and chart patterns.

Quick Thinking and Sound Decisions

It is important for forex traders to think quickly and make measured decisions when faced with unexpected events, especially when their funds are at risk. You cannot react to surprising events if you only look at charts. To get used to the correct response, you need to try visualizing unexpected things that may happen beforehand. You must be able to imagine the possibilities that may arise before you enter the market.

A Lesson from Martial Arts Students

Let’s look at martial arts students. They practice punching, kicking, and blocking well in the training room. However, when facing a real attack, many of the martial arts students freeze and do not react as planned. As a result, they have to suffer injuries despite being equipped with knowledge of self-defense.

Unexpected Events in Forex Trading

Unexpected events can easily occur in forex trading. Suppose you have placed a pending order just before an economic report is released. Suddenly, the report is leaked a few minutes early and the price movement becomes somewhat crazy, so the price hits your pending order. Because you didn’t anticipate this beforehand and didn’t make a plan if this scenario happened, you don’t know how to react. You leave your trading position in danger, unable to control it.

The Swiss Franc Crisis in 2015

Let’s look at a real unexpected event that happened in forex trading. In January 2015, the Swiss central bank suddenly released the minimum limit of 1.20 Swiss francs against the euro. As a result, the market was turbulent and the Swiss franc strengthened tremendously. Imagine if you had a trading position at that time, and you didn’t place a stop loss. Your trading account funds could disappear in minutes!

Managing Trading Risks

Usually, when unexpected events occur, fear tends to take over you and will interfere with your normal decision-making process. In both examples, the effect of surprise, fear, and shock instantly eliminates objectivity and problem-solving abilities. If you don’t have a backup plan to deal with unexpected surprises in the market, you may experience mental barriers when forex trading.

I know that predicting every market scenario is quite difficult. Is it possible for us to know how to act in every case? Sometimes we neglect to anticipate market scenarios that may occur, but it doesn’t hurt to always prepare for the worst-case scenario. Forex trading will teach traders to be able to control the situation and make quick decisions.

There is always something in the forex market that has the potential to “disrupt” your trading, but it is your job to think about how to manage that trading risk. If you are unable to read what is happening in the forex market accurately, then you should close your position first, either loss or profit. Or wait for the situation to calm down first, or you can switch to other currency pairs while hoping your trading is still going as planned.