Anyone vaguely familiar with medieval legend will have heard of the holy grail as the cup used in the Last Supper, which became highly sought-after by knights in the 13th century. One might wonder what this old story has to do with trading forex.

While the holy grail in forex has no relationship with any religion, it exemplifies how people can search high and low for something they believe is tremendously valuable. The idea of a holy grail should be familiar with any forex trader and has been a topic of debate for years.

Humans are naturally wired to seek riches in the quickest possible time and will explore as many shortcuts as possible. Trading any financial market, especially one as liquid as currencies, vastly triggers many desires of wealth and luxury.

Making money in forex is technically electronic and does not require any physical labor. Thus, the concept of there possibly being a way never to lose is quite alluring. Unfortunately, no holy grail technically exists, and understanding this is one of the fundamental factors any serious person should appreciate about the markets.

The fundamental reason why no holy grail doesn’t technically exist in forex

A holy grail in forex refers to the idea of a strategy that can consistently win all of the time without losses. Trading forex is about having more winning than losing trades. Mathematically speaking, someone’s win percentage does need to be decent enough over time to realize a profit.

The issue becomes when some traders believe this rate can be 100%, which is unrealistic and virtually impossible. But why so? It has to do with the primary drivers of the markets; human psychology or behavior. 

Many aspects of trading forex like indicators and other analytical tools are computerized, the majority of which traders use to make trading decisions. However, at its core, any market is more driven by humans than a bunch of programmed tools. It is one of the criticisms of so-called mechanical or automated systems.

By their very nature, a group of a few people is unpredictable. If we multiply this by millions, predicting what a large mass will do every time without error becomes substantially more difficult, if not impossible. 

The challenge comes back to how no one group or person controls a very large mass of traders due to the unpredictability aspect. Furthermore, there are hundreds of variables constantly at play moving the price that we cannot forecast all at the same time.

The problems of believing a holy grail exists in forex

At a fundamental level, we should always appreciate that no individual trader or group has a superpower or substantial influence on where price can go. 

Traders searching for a strategy with a 100% or even 90% win percentage possess a counter-productive mindset linked to not understanding mathematical probabilities and randomness, seeking perfection, and emphasizing too much on an individual trade rather than a series of them.

  • Seeking for perfection: Experts have always said trading forex is about probabilities and not certainties. Someone looking for a holy grail assumes everything is for sure. However, the reality is trading is more about analyzing the probability of something happening and to what extent it could.
  • Over-emphasizing on an individual position: Most traders who lose severely often don’t necessarily lose based on a string of positions but rather on one or a handful of trades. 

This boils down to a gambling mentality where someone ‘bets the farm’ on one position with the conviction of it not failing. A successful trader measures their profitability progressively over several months or years, placing little importance on the outcome of one random order.

Solutions to fixing the holy grail problem

Below are the significant considerations any serious trader should have about trading currencies to achieve profitable success:

  • Money management is the cornerstone of trading profitably. The point of trading isn’t about striking it big in one position. It’s more about making a series of hypothesized trading decisions where a trader understands their analysis may be wrong sometimes.

Based on historical data study, someone with a solid strategy should know how many times they can be erroneous without blowing their account. This is where proper money management becomes essential. 

If someone can lose 10 positions in a row and still have money to trade, it is only a matter of time before they can grow their equity above its previous mark.

  • Having a high winning percentage is wholly irrelevant and not necessary in forex. It all boils down to exploiting opportunities with potentially the highest reward against the risk involved.

Appreciating the nature of trading forex

Traders are looking to exploit the hundreds of cyclical patterns frequently occurring in the markets. They then build a framework or strategy around such patterns by defining a set of rules they should meet before formulating a trading idea. Most fail to realize that markets are constantly in flux, and conditions never stay stagnant.

The goal of having any strategy is only trading when certain conditions are favorable to it. One of the reasons many people change from one strategy to another is not understanding the ‘moods’ of the markets. 

For instance, currencies can sometimes be trending quite fluidly; and in other times, they might move in a tight range. In some cases, price may exhibit strong momentum in one direction, while it might not happen in other scenarios.

The notion of a holy grail implies having a system that can work well in all scenarios. Each condition in the market requires an entirely different strategy and mindset. The unpredictability factor varies widely as markets move from one moment to another.

It is better to adopt multiple strategies taking advantage of different scenarios than assuming one can work well in all of them.

Final word

It might seem futile to trade forex to uninformed people if they understand traders have little control over future events. However, the point is not about certainties but rather about weighing up probabilities. 

In a fashion similar to how the best poker players seek to maximize their winnings with the best hands, traders seek to make the most profit once they’ve found the best trading opportunities.

Achieving this requires finding an edge taking advantage of patterns happening often enough to yield a profit. At the same time, as traders cannot always predict human behavior consistently, money management becomes their insurance and ensures they stay in the game.

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