I remember when I first learn about financial terms, there are two terms that I really remember, that is, wants and needs. Those two terms are regarding money that we use in our daily activities such as food, lifestyle, and clothes. Such daily activities that we use with our money has closely related to our wants and needs in the human brain which you could see that sometimes we buy something based on what we want and not what we need. Many people do not realize that they are applying these wants and needs in the Forex market that leads their Forex account into ruin which would be explained further below.
After reading the first paragraph, you may now be wondering why is this Mr. Andre put an image of pizza and sandwich? What is the relation between the two food and my trading account in the Forex market? Well, simply because I want to explain it without a complex explanation so that other people who read this post would understand it. However, before that, to have a better understanding of wants and needs in Forex, let us pay attention to the definitions of the two terms below here.
Wants to Trade in The Forex Market
Now, this wants definition according to Cambridge Dictionary is something that you really wish or desire. This means that wants are based on your desires, that is, some kind of excited feeling if you have it that makes you wish to have it. For example, look at the image above which has a pizza and a sandwich particularly if you are a native Indonesian like me. Which one do you choose if you follow your wants? I bet most of you would choose a pizza over a sandwich because you really crave it than eating a sandwich.
Same as when you trade in the Forex market if you follow your wants where there are two choices in which the first choice is to open a long position and the second position is short. Based on your excited feeling or should I say your wants, which one would you choose if the market is in the bull period where the market goes up and up unknowingly there is a sign that it would go down but you have an exciting feeling that it is better to open a long position. I bet you would choose the long position, right?
Needs to Trade in The Forex Market
Move on from wants to needs. What are needs? Well, according to Merriam-Webster, needs are where you would find yourself in a situation that you must do or have something. Well, the definition itself shows signs that needs are something that must be done because it is important for you. Now, back to the image of a pizza and a sandwich, when you need to eat brunch you have all the ingredients to make a ton of sandwiches yet you are too lazy to make even one. On the other hand, a pizza would cost you, say $15, if you buy it. However, after you use your rationality to save your money, you fight your laziness and make a ton of sandwiches that is free of money cost except time to make it and you do not even want to buy a pizza as your stomach is already full with sandwiches.
From the example of a pizza and a sandwich, I bet you already understand what needs are. Let us connect it with Forex. When you see the Forex market is in the bull period, would you enter a trade to open a long position where you desire and are fearful of missing out on the chance to take profit from it? Or would you use your rationality and calmly need to see confirmation first before you make a trade? If you follow your needs, I bet you would wait for confirmation first and if it shows that the market would be going down, then, you would open a short position instead of a long position, right?
Conclusion
Your wants and needs to trade in the Forex market play an important role in preserving your account for a long time. Just like the example of wants and needs in the Forex market, it determines where your Forex account would be headed to whether to the path of an abyss (wants) or to the path of a heavenly sky (needs). Of course, many people would want to choose the second path, and to go to that path, people have to trade because they need to trade not because they want to trade to satisfy their urge.
The point of what I want to relay is that when you trade Forex, be wary of these psychology conditions that would manipulate your brain into believing that you want to trade while in fact if you look at the market with your rationality you would find that you do not need to trade because there is no a solid confirmation and if you still follow your wants, then, chances are high that it would lead you to unnecessary or unproductive trades
Written by Andre I.
References
Cambridge Dictionary. Want. Retrieved from Cambridge Dictionary. (Accessed 7 January 2022): https://dictionary.cambridge.org/dictionary/english/want
Merriam-Webster. Need. Retrieved from Merriam-Webster. (Accessed 8 January 2022): https://www.merriam-webster.com/dictionary/need