Intuition and Forex Trading.
Despite the complexity of the entire Forex trading system, a strategy based on intuition is still valid.
Any novice trader considers it the simplest and most preferable trading option.
It might seem difficult: look at the currency pair chart, the rate is rising and doesn't seem likely to fall, so open a buy trade. However, such experiments often fail.
Let's explore whether intuition and Forex are compatible and whether it's possible to build your own trading strategy based on this approach.
First, we should analyze the reasons for failure when using an intuitive approach to opening trades.
These include:
Incorrectly chosen market entry point – as you've probably already noticed, the exchange rate of a currency pair on any time frame doesn't always move in the direction of the trend. Furthermore, there are also Forex pullbacks , or short-term trend movements against the underlying trend.
Therefore, even if you guess the trend's direction correctly, you may open a trade at its very peak, only to have the price begin to pull back. This usually results in losses, which ultimately lead to the trade being closed.
The second situation unfolds in an even more dire scenario: the trader misjudges the trend and opens a trade against it. The existing pullback initially brings profit, instilling confidence in the correct direction.
However, the correction gradually ends, and if the trade hasn't been closed during this time, it becomes unprofitable. Instead of closing the position, the trader begins to wait for the initial situation to return. They are firmly convinced that the losses are temporary and the trend will soon return to normal. After all, it's much more easy to believe in good things.
As a result, losses mount to the point where the stop-out , leaving only a few cents in the account.
Exiting the trade is even more complicated. Typically, the trade is closed after making just a few pips of profit. The trader is afraid of losing what they've earned, and every counter-trend move triggers panic.
The diagram above shows that the main reasons for failure when using intuition in Forex are two factors: incorrect market entry and under-profitability.
Therefore, if you do want to develop a trading strategy based on intuition, you should pay attention to these two factors. Avoid spontaneous entries, and close open trades only when clear trend reversal signals are received. Alternatively, you can clearly define the time limit for each position.
But then, it wouldn't be trading based on intuition, but a completely different Forex strategy .
