10 October 2019

Gut Feeling: When To Go With Your Instincts

Gut Feeling: When To Go With Your Instincts

Trusting your gut feelings towards a trade means so much more than simply making a trade because you feel as though you should – actually, it means quite the opposite. Trusting your gut in forex trading means acting on an impulse that has only occurred due to your previous experience, understanding of forex strategies and comprehension of risk versus reward.

So, in this blog post, we’re exploring the potential value that trusting your instincts has on your forex strategy, identifying ways you can implement this into your day-to-day trading while providing you with a thorough understanding of what to consider before confidently utilising this skill. Not to be confused with emotive, reactive trading, this post will help prove your gut to be one of the best forex strategies available to you.

What are your gut instincts in forex trading?


Before deciding to incorporate this technique into your daily trading arsenal, it’s important to ask yourself whether or not you fully understand what it means to trust your instincts and how it could impact your entire trading account. In layman’s terms, your gut feelings are the hunches you feel before placing a trade, generally felt by more experienced traders when referring to their ability to ‘feel’ the market. Your instincts are based on an anticipation of external events that might be about to occur and impact the global currency market (and your trades) considerably.

As aforementioned, these feelings are more commonly felt by professional traders with years in the industry behind them and isn’t a skill that can simply be taught. Instead, it is one that has been nurtured and developed from consulting forex calendars, keeping trading journals and experiencing your fair share of both successes and failures in the industry.

Have you come across a similar situation before?


Think twice (thrice even!) before simply following your instincts on a trade. Firstly, ask yourself why you’re feeling the way you are about a trade; have you seen this situation before and it’s resulted in a success or, contrastingly, have you encountered another situation where something went wrong and you’ve learned from it? In both situations, it’s crucial that you consult your trading journal, consulting your notes of previous trades to make an informed decision on how best to approach this new situation.

Only after investing enough time in the market and trialing new forex strategies until finding the one that works best for you will you have a clear idea of what to do in certain situations and make well-informed market movements as a result.

Consult risk versus reward


Arguably the most important thing to learn before acting on a hunch is to remember to align your gut reactions with your mind’s judgments – if you don’t do this, you run the risk of feeling nervous and stressed upon making your final decision, unsure of your trade’s outcome. So, when judging a situation, it’s imperative that you consult a checklist to work out the risk versus reward, only accepting your gut feeling once you can confirm with yourself that you have made a well thought through, measured decision.

Not only are checklists good in the short-term, but they will help you train your instincts as a result of actively practising strategic thinking to come to a considered outcome – therefore allowing you to confront the forex market from the same angle, over and over again.

A feeling felt my more traders than they’d care to admit is that most meet situations where they feel uncomfortable about entering a trade based solely on their gut reaction. So, as long as you evaluate a situation before acting on your initial reactions, you’re setting yourself up on the right path to succeed. For more expert insights and to learn forex trading the right way, register for one of our forex trading courses online today!