Begin adapting to the language of Forex in a friendly way, with short definitions and common-language phrasing.
Take it as a warning or insight into the temptation on the market and how it can affect us personally, and how it may branch out into affecting those around us.
A little bit of humour along the way 🙂
Forex, and perhaps any trading system, has its own language. Many of the words may seem familiar, like ‘option’ and ‘position’. But what does it mean to ‘open a long position’ or to ‘open a short position’. How about ‘closing a position’? I’ll give you a hint: the difference between a ‘long’ and ‘short’ position is not primarily related to time, nor distance. The main difference is related to buying or selling.
As you read through, we’ve highlighted some of this trading lingo and provided a brief definition or some extra explanation to help keep you reading along with a greater understanding.
In fact, studying the language of Forex has been my pre-occupation since writing the first article. I’m up past 20 terms, just to show that there is extensive diving to do as we climb the learning curve. For those who are more relaxed and looking for a story, I’ve also translated into common language where possible.
..so..on with the story…
The set up: A position on Bitcoin vs. USD was opened,. From the appearance of the movement in the market, the prediction was for it to fall, so a short position was opened, or in other words the currency pair was ,sold.. A stop-loss was placed, and a take-profit value was set. It was an experiment, a simple test to observe what would happen and if the concepts of selling in a falling market, stop-loss, and take-profit were understood.
Let me take you to that moment in time: I begin reading strategies related to ‘buying the higher low’ and ‘selling the lower high’. Concentration is required to take in the information, actually no different than any of the research so far. However, a significant difference is on the rise: a position is open, and what I learn from reading the strategy may tell me to withdraw the trade, or close the position before something terrible happens. A family member, a child of 13 walks up to me and asks one of those questions where there is no real answer because I don’t understand what he is asking. I feel a prickly sensation inside, frustration, resentment, confusion, anger, a desire for this human to not be doing as they are in this moment.
Usually, I would have shifted attention from the computer to the human being making contact with me, but not this time.
Diverting some attention, I feel the pressure of staying focused on this research and the open position. I want to shift attention back to this work, so I explain how I can’t answer the question because I don’t understand. He continues asking, and I say “actually, I’m trying to focus”. A calm enough statement, but from my perspective I know something is up. I can feel the burning inside. The desire is growing for this external world to change. I can tell even in my language, the words I use, ‘focus’ rather than ‘concentrate’.
1) I needed to ‘zero-in’ on the information on the computer and channel my mind with tunnel-vision [concentrate], rather than to be open to the information from the surrounding environment [focus]; and 2) I’ve set a placeholder for the word ‘focus’ in my mind.
A little story: my mom used to work as a road traffic control person, someone who directs traffic during construction, holding the big red stop sign. During that time, she developed a clever saying to break the tension for when a pedestrian was doing something that irritated her, or was contributing to a dangerous situation. Like the time when a woman was walking and texting and almost fell into a manhole. The saying was “F.O.C.U.S – F*ck Off ‘Cause ‘Ur Stupid”. Internally, this is what ‘focus’ registers for me when I hear it coming from my mouth, even when it doesn’t mean that.
All that to show how I was tuned to my language and my inner feelings to then be aware that something with me was up; my balance was tilted.
Digesting the Warning
The moment passed, but the effect lingered with me. It was the first time since I arrived here that I felt the need to tell the other person to leave me alone, that I was busy, too busy to respond sincerely and from the heart, occupied enough to respond entirely from the mind.
Coming back from breakfast I noticed that the position had been closed, the stop-loss was hit. In other terms, the currency I had sold was bought at the price set. I lost an imaginary $227. I felt absolutely no sense of loss, probably because I realized it was only for practice.
Was it necessary that I read and understand the strategy at that moment in time? No.
Did my involvement in an open position have an effect on me? Yes. On those around me? Maybe.
What would happen if this was for real money, an actual investment. How would I respond?
What rules or guidelines would I feel the need to establish with the people around me? What would happen when those rules or guidelines were not followed?
Ganesh, my host, shared with me how when he was actively trading he would sacrifice things like regular meals, and when interrupted by his child he found himself erupting in verbal violence and lashing out. These were reasons for him to pull out of this role → out of the trading role, not the father role!
So, I take this as a warning. No harm done.
Temptation on the Rise
Here I sit watching Bitcoin: climbing, climbing, climbing. I’m reading the news, getting excited about the potential for profit. I’m also wondering when I should get involved and bring my own money to the table, but I coach myself to watch and learn, be a spectator, not a speculator. Anyway, I see it on the rise, and think to myself that surely it is going to fall sometime soon, and I can cash in on this. I’m being pulled in by temptation and greed. I mention greed because I’ve already opened a position on Bitcoin today and profited from this rise. My take-profit was hit, so I’m no longer involved in benefits from a continued rise.
The lure is strong, but there is also a counterbalance. Today, I was reading about ‘buying the low high and selling the high low’ as I mentioned above…actually it’s the other way around…’buying the higher low and selling the lower high’. → It can easily get confusing, and it will take some practice to master these things.
Based on this reading I recognized how the market was climbing, but it wasn’t a low high, nor a high low. I could open a position, expecting the market to turn, and if it did (“when it does” are the words in my mind at the time) I could turn a big profit. So I begin filling in the numbers, set a volume 10x higher than my previous position, and begin considering what stoploss to set.
My thinking: if I set a stop-loss too low then I’ll lose money once that is hit. How low is too low? This market could keep rising for some time before it crashes. It could rise by some huge unknown amount. If I set a stop-loss, even a huge one it could still get hit and I would lose a huge sum of money. It could be hit just before the market turns. That would be an unfortunate thing to wake up to. Well, it’s best that I just don’t set a stop-loss then…
→ Then it hits me
NO! I remember reading about this: always set a stop-loss!
I stopped what I was doing and began scribing the experience here, to you.
I see now how easy it can be to be swept away, and after only a few more clicks I would have placed the trade. The next step would have been to begin dreaming about how large of a profit I would aim for, and I can imagine that would be a luring experience on a totally different level.
All for now.
- Position [Online]. Investopedia. Available at: https://www.investopedia.com/terms/p/position.asp [Accessed: 29 Nov 2017].
- 4 Types Of Stop Losses [Online]. Babypips. Available at: https://www.babypips.com/learn/forex/stop-loss-whats-that [Accessed: 29 Nov 2017].
- Tyler Yell. 2013. Buy the Higher Low and Sell the Lower High [Online]. DailyFX. Available at: https://www.dailyfx.com/forex/education/trading_tips/chart_of_the_day/2013/05/02/Buy_the_Higher_Low_and_Sell_the_Lower_High.html [Accessed: 03 Dec 2017].
- Speculator [Online]. Investopedia. Available at: https://www.investopedia.com/terms/s/speculator.asp [Accessed: 29 Nov 2017].