Trading with a flexible mindset is a critical skill that all
traders must learn. While this may seem elementary, consider how often
you hear the media label a trader, a firm, or even themselves as a
"bear" or a "bull". To me, this makes almost no sense. Let's say that
you considered yourself to a "bull" for the USD, or in other words you
thought the dollar will rise in the future. To me that is a totally
empty definition. Does that mean your think the USD will go up
forever? Will it go up for the next week? Will it only go up if the
pair first drops one hundred pips to a line of support? Without more
details in one's opinion, stating that someone is "bullish" doesn't
give us much information. Don't get me wrong, occasionally I will use
terms like that, but I always try to define a context that describes
the nature of my opinion.
However, many people still will say they are bullish for a given
currency pair with no further explanation. Let's say that you are one
of these people, as I suspect many readers are. In my opinion, this is
a problem. The reason for this is that you have formed an opinion
before you analyze the facts. For instance, I am a Chicago Bears fan.
Because I want the Bears to win so badly (similar to someone holding a
long position wanting the pair to rise), I find myself irrationally
thinking that the Bears are better than they are. With that being
said, I think Jay Cutler is going to be much better this year. So even
though I know my bias changes my opinion, I simply can't help myself.
For sports, that is just a form of entertainment, and an opportunity
for my non-Bears fan friends to taunt me. However, in trading, there
is a lot more on the line. If you have a general opinion before you
actually analyze the current situation, then you are viewing the
information without the benefit of a rational mindset. This may seem
strange to hear, but it is true.
Don't get me wrong, if you have a current opinion that currency pair
is likely to behave in a certain way due to your analysis, that is
fine. But many traders form open ended opinions on currency pairs and
then try to find analysis that fits into that opinion. Let's say you
consider yourself to be generally bullish on the EUR/USD. The reason
for this is that you think the Euro "looks better" than the dollar.
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