{"id":21378,"date":"2012-10-11T13:00:23","date_gmt":"2012-10-11T17:00:23","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=21378"},"modified":"2023-04-03T13:20:23","modified_gmt":"2023-04-03T17:20:23","slug":"are-you-too-smart-for-the-forex-market","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/are-you-too-smart-for-the-forex-market","title":{"rendered":"Are You Too Smart For the Forex Market?"},"content":{"rendered":"

Throughout our entire upbringing we are conditioned to believe things like getting good grades leads to great rewards. This concept plays out well in the medical and law professions for the most part. These people get paid for being smart. Now when it comes to trading the financial markets as a profession, being too smart can often hurt you despite what people generally believe.<\/p>\n

When you watch the \u201cexperts\u201d in the financial media, or when you talk to your broker, or even worse your financial planner, you assume, \u201cThese people are professionals, they sound so smart with all this financial stuff, they must know a lot more than me when it comes to investing my money so I will take their expert advice.\u201d<\/p>\n

The financial services industry hides behind this illusion of \u201cI went to an Ivy League school for finance or economics, therefore I know a lot more than you about where the market will be a year from now. So listen to me, and pay me huge fees for my advice and service.\u201d Just look at who the big global banks hire. Now I am not saying these are unintelligent people, clearly they are, but my point is this: Intelligence alone is not enough to protect you from the uncertain nature of the financial markets.<\/p>\n

I speak to new traders all the time that come from one of these \u201csmart professions\u201d. They tell me things like, \u201cI have a bachelors in economics and I\u2019m pursuing my master in finance, so I pretty much know what I am doing.\u201d Then I ask how they are doing and the response is usually, \u201dWell these markets make absolutely no logical sense right now, so I\u2019m still trying to figure out a valuation for the US dollar.\u201d Umm, have fun with that.<\/p>\n

The important thing to understand about trading financial markets is this: The role of the financial markets, especially futures and forex, is to provide liquidity and act as a mechanism to manage risk. This means the major participants in the market are acting on price to either take on more risk, or reduce it. This action moves prices.<\/p>\n

What is most important when you are analyzing these markets is to think in terms of supply and demand at the moment, and not in terms of why prices should do this or that. Price action can give you a sense of what is possible and from there you can measure risk and decide if it is a risk that makes sense for you.<\/p>\n

Your focus as a trader should be on the behavioral aspect of the market. It is the actions of the crowd of market participants moving prices. It matters more that you can recognize their actions or lack of action, than the specific reason why they should be taking action. This is about understanding the greed and fear that drives financial markets, and how to control your own actions within that context.<\/p>\n

When you are able to focus on the relevant market information, you are then able to see through all the noise that is so prevalent in the financial industry. So the next time you find yourself listening to an \u201cexpert\u201d on where the market will be in 6 months, you should know this person doesn\u2019t know any more than you do. If you can develop the ability to listen to the market instead of the \u201cexpert,\u201d you will have a much better sense of the true market potential.<\/p>\n

—
\nMarc Principato, CMT
\n\"\"<\/a><\/p>\n

Risk Disclaimer<\/a><\/p>\n

*No Relevant Positions<\/p>\n","protected":false},"excerpt":{"rendered":"

Throughout our entire upbringing we are conditioned to believe things like getting good grades leads to great rewards. This concept plays out well in the medical and law professions for the most part. These people get paid for being smart. Now when it comes to trading the financial markets as a profession, being too smart can often hurt you despite … Read More<\/a><\/p>\n","protected":false},"author":1030,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[1390,2092,2078,58,56,18,144,38,4690],"class_list":["post-21378","post","type-post","status-publish","format-standard","hentry","category-general-comments-2","tag-forex","tag-forex-training","tag-market-behavior","tag-markets","tag-smb","tag-smb-capital","tag-trader","tag-trading","tag-trading-education","no-post-thumbnail"],"yoast_head":"\nAre You Too Smart For the Forex Market? | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/are-you-too-smart-for-the-forex-market\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Are You Too Smart For the Forex Market? | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Throughout our entire upbringing we are conditioned to believe things like getting good grades leads to great rewards. 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