Why Shouldn’t I “Predict” Forex Price Action?

Sufficient experience in the forex market can fool some traders into thinking they can fully predict price action.

After all, if you have years of screen time and invested the 10,000 hours to develop your analytical skills, it can be tempting to assume you know the markets inside out.

This kind of assumption is dangerous because it can eventually turn into what I like to call “merchant god complex”, where one has an unshakable faith in one’s infallibility to predict future price movements.

This usually occurs when a forex trader is so confident in his ideas that he refuses to admit the possibility of error.

But as anyone who has had their fair share of losing trades can attest (and that’s practically every trader out there!), uncertainty is part of the nature of the forex market.

No one – not even the greatest financial experts who have access to a wealth of economic information – can come up with 100% accurate predictions for price action.

Insisting that you have a special ability to predict exactly how a currency pair will behave can ultimately lead to your downfall as a trader.

Of course, this is different from getting a good feel for market behavior through consistent deliberate practice. What this process aims to achieve is the ability to actively learn and improve throughout your trading career.

This means being able to accept your losses, admit your mistakes, reevaluate your forex trading strategy and make the necessary changes. In fact, the purpose of deliberate practice is the complete opposite of thinking that you are an all-knowing and all-powerful trader!

Instead of making predictions, learn to develop biases.

The former represents the expectation of a certain (and usually specific) outcome, while the latter is more flexible as it is open to confirmation or denial by the markets.

Once you accept that it is IMPOSSIBLE to completely predict market behavior, you will find it easier to make adjustments to your strategies.

Focus on managing risk well and controlling what you can. This includes researching potential triggers and price reaction probabilities and monitoring position size, stops and holding period.

At the end of the day, you have to remember that the market is the boss. He couldn’t care less where you think the price will go.

To become consistently profitable, you must learn change what you see and not what you think.