Categories: News

What Forex Traders Can Learn From a Greek Philosopher

A somewhat recent report from Citi showed that 84% of global Forex traders believe they can make positive monthly returns.

However, according to the same report, only 30% of retail Forex traders achieve those positive monthly returns.

Now, let’s think about this.

We are not talking about breaking the bank. We are talking about making anything more than 0 after a month of trading.

How can so many smart individuals be so blatantly wrong?

What separates belief from reality?

My best guess: Overconfidence.

Wait, you’re telling me that traders are just a “bunch” of narcissistic, arrogant people?

No. Overconfidence is a cognitive bias which has been studied by decision scientists and psychologists for some time now.

Overconfidence is believing you know more than you do.

Everyone is affected by overconfidence, even renowned experts have shown this bias and made erroneous decisions (in the fields they were experts in, no less).

The same occurred in a study of Harvard trained managers making erroneous judgments in their fields of expertise due to this bias.

You know what is going on in the markets and you trust your strategy, system, and indicators. But how much do you know, really?

Any way you slice it, currency markets are too complex. And the price of overconfidence is too steep, as 70% of Forex traders can attest.

If you are one of the “technical analysis-only” traders, you are twice as guilty of overconfidence.

Having blind faith in a one-dimensional approach to make money consistently in the markets is a strong version of tunnel vision.

OK Emil, but how can I, a retail Forex trader, diminish the effects of overconfidence?

The first and most difficult thing to do is accept the limits of your knowledge. Like the famed Greek philosopher Socrates once said:

“I know that I know nothing”

Then, you need to seek the best expertise you have access to.

While experts still show overconfidence, the effects of this bias are significantly reduced the more you know of a topic (according to the same Harvard study).

This explains why major players such as Hedge funds and multinational banks pay thousands of dollars for premium information feeds.

It’s impossible to be an expert in everything, so you reduce the chances of being wrong by asking people who know more than you do in their narrow specialties.

As a retail trader, your best bet is to find the best analysts and pay attention to what they say.

techfeatured

Recent Posts

The Benefits of Partnering with an IT-Managed Service Provider for Your Business

Table of Contents Introduction to IT Managed Service Providers Why Outsource IT Management? Cost-Effective Solutions…

2 months ago

Choosing the Right Thresholds for Your Home: A Comprehensive Guide

Key Takeaways: The importance of selecting the correct thresholds for different areas in your home…

4 months ago

Innovative Railing Gate Solutions for Modern Homes

Key Takeaways: The variety of railing gate designs can significantly enhance the aesthetic appeal of…

4 months ago

How To Choose the Perfect Vehicle for Extended Commutes

For many, commuting is an unavoidable part of daily life. But when that commute extends…

4 months ago

The Future of Mobility: Innovations in Automotive Technology

When you're on the road, you want to feel safe, comfortable, and like you have…

5 months ago

Clean Air Starts at Home: Tips for Maintaining Indoor Air Quality

Key Takeaways: Understanding the significance of indoor air quality. Identifying common pollutants in your home.…

5 months ago