Don’t Trade Forex Like You Are Participating in an Ebay Auction

eBay is the world’s largest online auction site where bidders can find just about everything for sale, from the smallest items of jewelery to Gulfstream jets. If you are looking for clothes, accessories, spare parts, household items, toys, tools or ANYTHING (including a lock of Justin Bieber’s hair) then go to eBay. If you have never before bought an item off eBay, you don’t need to be registered to browse the hundreds of thousands of items for sale every day. The eBay marketplace is so vast, it would be impossible to view everything on offer and make the correct winning bids. The Forex market is like an eBay auction site and we are the participants. The market, run by the market makers will be offering almost 200 global currencies¬† to be traded or exchanged for another currency at a set price. Now, most brokers won’t be offering as many as 200 currencies to trade, in fact it is likely there may be less than 20 chosen currencies on offer for you to trade. The Zimbabwe Dollar may not be available to trade on your broker’s platform, but that doesn’t mean than transactions exchanging Zim Dollars for US Dollars won’t take place. Such transactions happen at banks and tourist foreign exchange booths everyday, we just don’t get to see all of them on our trading screens.

How can traders prevent themselves from trading like they are at an Auction?

As a trader, you cannot trade everything available on the forex market. You would have too many item to watch, too little money to purchase everything and too little time to dedicate to such an unrealistic task. Your forex trading platform has menus (like eBay) which contain all of the forex pairs on offer. Some brokers do lump all currency pairs under one menu item (Forex), but most will provide a menu containing Major Forex Pairs, Minor Forex Pairs and Exotic Forex Pairs. If all the Major, Minor and Exotic foreign currency pairs are on display everyday (around 60 spot pairs on a standard forex broker’s platform)¬† then it is unrealistic to expect to be placing trades on all of them. Furthermore, many of the currency pairs will be correlated, in other words there will be a positive or negative correlation in the price movement of one currency pair that acts interdependently with another.

Choose in advance which forex pair you would like to bid on.

Let’s call the pair you wish to trade Item number 7 on the forex auction menu. Item number 7 is described as GBPUSD and is formed from the national currency of Great Britain and Northern Ireland or Sterling, and the national currency of the United States of America or Dollar (US). Together the pair is nicknamed ‘cable’ because in the nineteenth century the exchange rate between the two countries was transmitted by an underwater communication cable. As a trader, just like a bidder at an eBay auction, you would be preparing to place your trade on item number 7 GBPUSD. In forex trading on any currency pair, you have a choice to Buy (Go Long) the GBP, or Sell (Go Short) the GBP. For whichever decision you make, whether to buy or sell you will automatically be doing the opposite on the USD.

Whilst patiently waiting for your trade to come up on GBPUSD, you may wonder how the other forex pairs have been trading today while your attention has been focused on the GBPUSD. To your dismay you could find that you missed other trades on other major, minor or exotic forex pairs that you would have profited from, but weren’t watching them.

This happens. As a forex trader it is better to accept that you can’t trade everything, and therefore it is normal, though frustrating to feel that you missed out. Remember the auction sites. You just can’t possibly participate in every auction and sale. Pick the forex pairs you are interested in and make your choices. Please don’t try and do more than that. You will end up over trading and over analyzing which is worse than missing out.

Here are Some Do’s and Don’ts When You Feel You Missed a Trade

  1. DO – Relax and take a break. There will be other trades.
  2. DON’T – Buy more computer monitors to look at more charts.
  3. DO – Continue to research your next trade.
  4. DON’T – Revenge trade (take trades impulsively and in anger).

CONCLUSION

The forex market is full of trading opportunities. As individuals, we just don’t have time to get them all. At auctions, there will be others who pickup winners on items you never looked at. Stick to your trading plan and relax in the knowledge that you can’t have them all. There will be more opportunities coming your way. Before you take your next trade always answer the one question that needs to be asked before you take a trade as written in a previous article.

Most of all. Rest.Relax.Recover at the Pip Asylum. We know trading forex can get a little hectic at times.

 

 

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