The Secret to Making a Profit in Forex Trading? Knowing When to Quit

by Andrew McGuinness     Mar 29, 2018

If you've spent any time in a casino, you've no doubt already heard the phrase "the house always wins." But what does that mean? When the cards are dealt, doesn't the man dealing the cards and the person on the receiving end have the same odds of winning? Unless the dealer is peeking, cheating, or using a rigged deck, shouldn't there be equal odds every time a game is played?

While this might be true on the individual game level, you'd be missing the forest for the trees if you believe that you have the same chance of walking away with money as the dealer overall. While you might make money on an individual hand of blackjack, when you keep betting or believe that you're on a "hot streak," you'll inevitably hand the odds back to the dealer and at the end of the day, walk away from the table having lost the money that you'd originally bet, along with all of your temporary winnings.

Think about the card-counting strategy that became famous in 2008 thanks to the blockbuster hit 21. The movie is based on the true story of how a few MIT students had seemingly developed a system to beat the odds and walk away a winner at the blackjack table. Though the crime thriller makes it seem like only super math geniuses could ever understand how to count cards, the truth is that the system is relatively simple when it's broken down into core components. The students sat at the blackjack table, and placed minimum bets on almost all hands until they were able to narrow down the cards remaining in the deck to predict how the last few hands would play out. They would then place massive bets on the hands that they could predict, which allowed them to make up their original losses and turn a profit. Then, most importantly, as soon as a new pack of cards was opened, they would leave the table with money in hand.

That last part is the most important lesson that a Forex trading beginner can learn. If the students had stayed at the table, they would have inevitably allowed the casino to make their money back by slowly chipping away at their winnings until they were nonexistent. This is much easier said than done; even the most stoic of person will still feel the tug of temptation to keep going while they're winning, allowing their greed to get the best of them and inevitably leading them to an empty pocket. However, because the students knew when to duck out and were able to override their emotions, they were able to walk away with a profit

The same is true in the world of Forex trading. As a trader, you'll have to decide when is the right time to sell, and when you see the value of one of your held currencies rising, it can be tempting to keep going, ignoring your technical or political indicators and seeing how high the value will rise. Unfortunately, every experienced expert in Forex trading will tell you that this is a recipe for disaster. One of the best things that you can do to control your losses is to leave your emotions out of your trading. The two things that rule the Forex market are greed and fear; beginning Forex trading hopefuls who can separate their emotions from their trading strategies will reap almost immediate rewards.

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