When you step into trading you will discover a new emotion which you might not have experienced before or not as heavy as what you will do when you begin to trade live. Now this emotion only comes alive and can be only experienced when you are trading live with real capital at risk.
Now the emotion I am talking about is the emotion of ‘Money’ more importantly the experience of losing money. This is possibly one of the most severe emotions I have ever experienced, and you can only understand when you experience it yourself.
We hold an emotional attachment to money and that is because as we exchange our time for a specific value of fiat currency (money) so therefore we place a high level of value on the money we have in our bank accounts or cash.
In the normal world we typically don’t worry too much about spending money as we often create an exchange where we know when we exchange our money, we know exactly what we are getting in return. An example would be buying a pair of shoes; let’s say we like a pair of shoes which are valued at £100 and because we like them that much we are happy to create a transaction for £100 of our money in exchange to buy the shoes. At that point we have a fair exchange in value as we believe the shoes are worth the £100 so we are happy to buy and the seller is also happy as they receive the amount they believe the shoes to be worth.
So, in that scenario everyone is happy and that is 99% of the time how we create and fulfil transactions in our lives, as we create a fair exchange in value between the buyer and seller; where equilibrium is found between both parties.
Now the important thing to remember is that in 99% of the transactions we either create or participate in we know what we are exchanging our money for whether that be a; car, house, clothes, shoes and so on. We typically always know what we are getting for the outcome of that transaction. We can even create a fair exchange by selling our time, services or skills for a specific amount of money we believe that time, service or skill is worth and if the buyer also believes that is fair value then we have created a fair exchange.
It is only when one side of the market fails to deliver that value as agreed a fair exchange has not been met. Whether that be a buyer not willing to pay but has already taken the goods or received the services provided by the seller or someone paying for clothes online but never actually receiving them.
But when it comes to trading the exchange works slightly different than what we are used to and familiar with, here’s why;
In trading when we execute a trade we know exactly how much our trade is worth. We know much profit we stand to potentially make and how much risk we also stand to potentially lose.
Where a transaction in trading differs to a transaction we are typically used to is that we don’t know what the result of that transaction will be i.e. if we will make money or actually lose money until we get the actual outcome. So, uncertainty is created because we have already exchanged our money, but we don’t know for certain what we will get in return for our money.
Certainty for the outcome of that transaction is removed unlike for example we were to walk into a shop and purchase a pair of shoes for £100. As we know every part of the transaction before it even takes place because we know what we need to exchange and what we are getting in return at the end of that same transaction.
In trading however we don’t have the one single outcome instead we two potential outcomes and we don’t know what that outcome will be until it happens.
This level of uncertainty for the outcome of a trade causes people to believe a fair exchange might not have taken place at certain times.
This then brings us on to the feeling of you losing money because you might not have experienced it before unless you have made bets in the past where the outcome wasn’t what you expected. Because in trading you are betting on a specific outcome to benefit you but there is also the possibility of a separate outcome too which will go against you.
Now when traders lose money they believe there was no fair exchange as the outcome was not what they wanted.
However, when you open a new trade what you are paying for is not a guarantee of making a profit or a win but for the opportunity to participate in the market through speculation. That is what you are actually paying for the opportunity to participate but for many they don’t understand this concept.
Your trade/position is an entry to participate/trade the markets and to speculate on what might happen next following your entry.
Now the outcome of that position is uncertain as you are speculating in a free moving market where the market can do whatever it wants, whenever it wants.
What you are doing when you open a new trade is paying the market for an opportunity to participate through speculation.
So in my opinion there is most certainly a fair exchange in both the market and trading.
This is how the transaction takes place when you enter a new trade; you want to participate in the Forex market through speculation and you use a % of your trading account to open either a new Long or Shortorder as your entry. The market accepts your position at the current market price/value and in return gives you the opportunity to participate with the outcome of either making or losing money.
When you execute your trade you acknowledge and agree to the terms of the market. When your order has been fulfilled and executed into the market your end of the transaction is then complete.
When you then exit the market at that point the market has fulfilled its side of the transaction which will be with the outcome of either a profit or a loss but either way the transaction has now been fulfilled as both parties (You & The Market) have now fulfilled both parts of the transaction.
Therefore, there is most certainly a fair exchange in trading because you went to the market and offered a certain amount of your capital to participate through opening a position in the live market and create the transaction. So as long as you get an outcome for that position the market has also fulfilled its side of the transaction too, regardless of the outcome be good or bad on your behalf.
So if you don’t understand the terms of the transaction you are creating and participating in then that is ultimately down to you and a lack of self-awareness for what you was getting involved with.
The market is free moving, unbiased and non-judgemental so it cannot be anything but fair. When you then decide to participate you also believe it’s fair because you only pay attention to the outcome of making money that is why you create the transaction in the first place but you ignore or disregard the known outcome of losing money.
The only time traders believe the market isn’t fair is when they don’t get the outcome they expected but what they did get was the outcome they agreed upon at the beginning of the transaction the only reason they are upset is because its not what they wanted and that is why the market will always provide a fair exchange in value.
One last thing to think about is do you think traders think the market still isn’t fair when they make money?
I hope you enjoyed this read and it allowed you to understand that sometimes we don’t get the outcome we hoped for in a trade but we always get the outcome we paid for through the terms of the transaction we agreed to always being fulfilled by both parties.
Thanks for reading,