Big money is made trend following in forex markets however most traders are reluctant to do it and instead try and trade for small profits – but it’s a fact the big profits are made following the longer term trends. So why don’t traders want to follow the big trends? There two main reasons…
They think they can make more money day trading and fall for the huge industry that has grown up selling short term day trading and scalping systems.
All these systems come with simulated track records and all will lose you money.
It’s obvious – you can’t predict what millions of forex traders are going to do in a few hours – all short term volatility is random and if you try and predict what will happen, you will lose.
The second reason is more complex.
It comes down to the fact that most traders can’t accept big gains!
This may sound a bit of a paradox, as all traders are in forex to make money – but they have problems accepting profits, here’s why:
Its obvious if you look at a chart that there are long term trends that last for months or even years. This is simply because they reflect the economic cycle of the country they represent and economic cycles last for these periods.
Now if you can lock into and hold these trends, you can make huge profits but most traders don’t have the discipline to do so.
Because markets are volatile and a typical scenario unfolds in the following way.
A forex trader enters a trade and is pleased to get a profit but the bigger the profit becomes, the more tempted he is to take it. Swings in equity start to eat into his open equity and eventually his nerves get the better of him and he snatches a marginal profit – even though he knows the trend will probably continue.
What happens next?
The trend carries on piling up $10, $20,000 or more and he’s not in but he knew the trend was going to continue! He just didn’t have the discipline, or the courage of his conviction.
There is no doubt that if you lock into the big trends you can make huge profits.
I know traders who trade less than once a month but make triple digit gains, holding positions for weeks or months.
They know that you have to sit through short term equity dips – but if you have the right forex trend following system that doesn’t matter – you have your eyes on the bigger prize of mega profits.
Big profits are made trend following the currencies but very few traders have the confidence and discipline to do it, although it’s the best way to trade and can make you huge profits longer term.