In forex online trading Mathematically Optimal is Psychologically Impossible

Those who join the forex market for the first time try their best to make such strategies which they think will make them earn in millions. Most of these strategies are highly practical that actually make them earn what they desire. Even in most of the cases they win $3 against the loss of just $1. Suddenly, the scene changes and all what they invested in the forex market goes down and they bear heavy losses. One must be wondering why? This is because the nature of business in the forex market is psychological not logical. This way, your emotions are going to be overwhelms in the end, and possible you will be making a worst possible exit from the forex market.

Trading is more art than science

E.Derman working at Goldman Sachs as head of quantitative strategies, once said that “When you are applying physics you are actually playing with God, and he doesn’t seem to agree with you.” In finance however, you are playing with the creatures of God, who are unstable and their feelings are momentary. Furthermore,, the field in which they work is loaded with ever-changing news.
This is a basic problem with a majority of newbie. They feel that they can extract a solution and with that they will put them in a profit machine which will bring profits for them. Unfortunately, trading is not “engineering” rather it is an art. As soon as a trader realizes this phenomenon, he will put himself in the right place.
Real world vs. Text book
Now I am going to present an example that will prove that in trading what seems optimal as mathematics is usually impossible psychologically.
The custom wisdom in the forex market is that a trader should use 2:1 ratio of reward to risk. On paper this may look like a good strategy. With this strategy, if a trader is just 50% correct, he can gain a lot in the future. With this ratio, even if a trader is 6.5 times wrong out of 10 times, he can still make money. However, in reality, this looks like a difficult thing to get.
Consider putting yourself in the following scenario: You decided to select the GBP/USD currency pair for trading. Assuming that you short the currency pair at 1.7500 and decided to stop at 1.7600, whereas the goal you set was 1.7300. Now assume that at the start, everything was going in the right direction. The price moves as per your desire and your selected currency pair drops at 1.7400. After that from 1.7360 it slumps to 1.7300. After this point, your currency pair GBP/USD decreases its pace of declining and starts to move back. Now the prices are as follows: 1.7340 to 1 .7360, and 1.7370. By watching this, you decide to remain cool. This is because you are looking for a 2:1 reward to risk ratio. Unfortunately, it doesn’t happen and suddenly your pair starts to slip, and it stops from the point where it started.
By watching this example, it shows that for getting just 180 more points, you actually faced a loss of 100 points. As a result, you decide to create a swing of 280 points. So, this is a real picture of the trading world which is a lot different from what we read in the text books.