How Low Can Forex Go?

Greece is falling apart. Spain isn't far behind. Nobody really knows what is going on with the American economy. The Euro keeps dropping and is at a four year low. If you are a staunch bull it's time to act like a real life bear and go into hibernation. The Forex market is getting tanked.

In this kind of environment, there are a few philosophies that run rampant and should probably be avoided at all costs. The most obvious dangerous philosophy right now in the Forex frontier is, “it's time to pick bottoms”. Can it happen that you'll successfully pick the bottom and ride it on up to unforeseen gains? Absolutely. Is it probable? Absolutely not. There is one advantage to trying to pick a bottom of any slide in the Forex market, or in commodities: As opposed to trying to pick a top, where there are infinite possibilities; by picking a bottom, the market (whatever market you may be dealing with) can only go down to zero. So, in a sense, by trying to pick a bottom, your risk (relatively speaking) is limited. The obvious problem is that so very few of us are sufficiently capitalized to ride a series of wrong decisions down to zero.

The next most prevalent dangerous philosophy in these kinds of markets is: “The market is due for a correction”. This statement is heard in both Forex and commodities markets, and the statement, in any situation at all, is false. The market is never “due” for a correction. The market is never due for anything, particularly a “correction”. This implies that the market, somehow, is wrong. The market is never wrong. The market is always where it should be at any particular time and it is never up to us to decide whether it is right or it is wrong. If you ever try to tell a market what to do it will most often times respond to you with a margin call. Large banks may be able to get away with it. Large corporations may be able to get away with it. The individual Forex trader was never meant to get away with it. You can look at your empty account balance and tell yourself that you were right and the market was wrong and it will change nothing. The successful Forex trader doesn't fight it. The successful Forex trader rides it.

The third most prevalent dangerous philosophy in these kinds of market is: “Waiting for the market to turn around”. Whether you are waiting for a bull market to become bearish, or a bear market to become bullish, the one thing that is in common in both these situations is the word “waiting”. And waiting often times means leaving money on the table. There is an inherent fear amongst Forex traders of getting “caught”. Either caught short, or caught long, which results in a loss. Nobody wants this to happen but it will, and it does to everyone. But it's nothing that a well-placed stop-loss order can't solve. It's better than waiting. If you're waiting for the perfect market and the perfect chart point to get involved in a market, you're going to be passing up many opportunities. There is always a trend to be spotted. Some are long, and some are short. They're there to be had.

The answer to the question, “How low can Forex go?”?

Who cares? that goes for stock trading too.