It’s been noticed by some traders that they can be looking at exactly the same forex chart as another trader, but they will behave differently. This becomes an interesting observation when you take two experienced traders with the same chart, and even the same trading pattern, and they still reach different conclusions and behave differently. Let’s have a look why this might be the case. Why would different traders see the same forex charts differently? By understanding how and why multiple perspectives can exist in the market at the same time, you can broaden your own perspective and become a better trader.
Position or No Position
Any trader who has taken a position in the market will view a chart differently to a trader who has no position in the market. Even if everything is going as planned, your trading strategy is looking good, and you’ve stayed within your pre-risk trade parameters, your money will still be at risk if you have an open position. This will influence how you view a chart. You’ll be thinking about the money that you could lose. A trader that has no open position, on the other hand, will not be thinking about money at risk and will view the chart with a different perspective. The best way to trade is to view each chart on its own, as if you have no open positions.
Over-Committing to a Trade
Any person who is over-committed to a trade will be more likely to make a mistake. Risk increases emotions and the more money that you risk on a trade, the more emotional you’ll become when it comes to future trades. This means that any trader that has risked a high percentage of his net worth will see a chart differently from someone who has not risked the same amount of their net worth. If you take out risk, you take out emotions – you eliminate stress and fear – and you’ll be able to view the chart more objectively.
Recency bias impacts every aspect of our lives. Recency bias is a bias that we have based on a recent experience that you had with a similar thing. In the case of forex trading, one trader may have seen a similar chart recently, but lost money on it, while another trader may have seen a chart like this but have made money on it. It is understandable that these traders will see this same chart and react differently to it.
The Bottom Line
There are many other reasons why two traders might see the same chart at the same time, but react differently to it. Most of the reasons boil down to past experiences and how invested you are in the market because this is where emotions come into play. After all, traders are only human and this is why trading can be so difficult. To be a successful trader, you need to put your emotions aside and look at every chart as if in a vacuum.