Forex trading has the great potential to become a lucrative and rewarding career that will allow you to have a lifestyle that few other lucrative activities in the world can offer to people of many roads in life, and without asking any of these men and women for a degree or some special certification.
But Forex trading is not easy; it may be simple to enter and place your first trade, but becoming a profitable trader is a different thing. You will have to acquire the right knowledge and techniques to understand and know when to enter or exit a trade, always fulfilling the main goal that every trader should have; to make money.
There are two types of analysis that you can perform in the Forex markets. They are known as technical analysis and fundamental analysis. Commonly, traders tend to divide themselves into “technicals” and “fundamentalists”. Each group is dedicated to the main tools that each type of analysis provides them.
Technical forex traders base their trading on the analysis of charts and the number of indicators derived from plots of price swings and patterns. Meanwhile, fundamentalist traders base their trading mainly on the fundamental numbers and economic indicators of countries economies. Although, even if divided, both trends tend to complement each other to some extent.
In this article, I will side with the “fundamentalists” and focus on one of the situations that all forex traders should be aware of and not let the events involved affect their trading efforts.
This risky situation is when unprecedented chaotic world events begin to develop as the trading day proceeds. The power of the media (television, internet, print media) can amplify and sometimes even distort the events that are occurring and have a significant impact on trading day. The result of this magnification and the rapid spread of news about the series of unfavorable events that are taking place is an increased atmosphere of fear, confusion, and uncertainty in the trading world. And fearful traders are not likely to make the best trading choices because they have indulged in panic and emotional reactions rather than rational and intelligent decisions.
If you need to have more specific examples of these types of events, you can search your memories a bit and consider the impact of just a few types of unfavorable chaotic world events like political upheavals or corporate scandals like; Enron, WorldCom, or people like the Martha Stewart trial case, etc. There is also the example of the terrorist attacks of September 11 in New York, March 11 in Spain, etc. Also, natural disasters: tsunamis, earthquakes, floods, freezes, droughts, and hurricanes, along with wars, can cause major disruptions in a trading trip.
In short, every forex trader should be completely sure that their trading method has built-in safety guards (stops, limit orders) to prevent a large financial loss of their trading account in case any of the unfavorable events I mentioned above ever occur. And being realistic, many of these events will certainly happen in the future.