Investing

Why are choppy trends not as profitable as they seem?

There are different categories of trends in Forex. At one time, the price will tend to move up and there are no obstacles. Everything seems to go smoothly but at another time, the price may go down. These two are the most common trends that can usually be found when investing money in currency trading. A key element to remember is that the two currencies are intertwined with each other. Unlike in the stock market, the chance of losing money is higher and can result in immediate loss if there is even the slightest mistake. However, there is also a third force in action. It is the choppy trend that many people have no idea. In this article, we are going to elaborate on why this is not a great concept to invest money during this time. Many people will disagree but at the end of the day, it is the individual’s fund that is at stake.

Before we begin explaining, a little background information can help you understand some of the basis. A choppy trend is usually identified when there are many variables in price patterns in a small period. For instance, the trends do not have any regular pattern. Instead of pointing out any obvious direction, it is hard to make out the ultimate direction of the trend. Hence, the name choppy trends. It is also when the volatility that is at peak, so invest at your risk. Do not worry if you have not understood it yet. Throughout the passage, we will try to clarify things using examples that will help you to form a clearer picture.

The direction is not established

Perhaps, this is the sole reason why it should be avoided at all costs. Trading is risky and there is no such thing as confirmed success. Even the professionals lose capital sporadically. To avoid such a fate, it is advised only to invest when there is a strong, dominant trend in the market. Imagine having $100 in your account. If the direction is uncertain, there is a high danger of losing money if you place a buy order when the price is going down. If unchecked, it can empty your account quickly. Therefore, it is best to hold onto the fund until this mess is cleared out.

Hunts down the trade

The big players in the Hong Kong stock exchange always avoid the choppy market. They know such choppy market can easily hunt down the trades. Even if the trade the best stocks, they might have to lose money due to an aggressive approach from the market. So, try not to risk too much as it can impose a great risk on your career. Follow the safety protocols and you will feel more comfortable.

A sudden surge in the wrong direction

This is the biggest fear of professionals. Despite having thousands of dollars in their account balances, they still refuse to trade in such perilous conditions. It tells us how risky this sector is in practice. The choppy trends are short-lived and they can quickly turn lethal. Imagine the same trade but for $1000. If successful, you would make a profit of $100 but if you are unsuccessful, a big chunk of your capital is going to vanish. Not many people can afford this luxury. If the risks to reward ratio is implemented, it can be confirmed this is not worth the risks. The dangers are potentially career-ending and it could mean a wrong movement can throw investors and traders off the market.

They are tricky to predict

These pesky little rabbits are incredibly hard to identify, let alone predict the future position. It has been long rumored that choppy patterns are best for making quick bucks but all such efforts have gone into vain. If required, we advise you to open a demo account and try it yourself. It is the best way to illustrate how seemingly profitable trends with high movements can become dangerous and sweep away your fund.

A post by Kidal D. (4582 Posts)

Kidal D. is author at LeraBlog. The author's views are entirely their own and may not reflect the views and opinions of LeraBlog staff.

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