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Avoid Bias

Every trader brings preconceived notions to the market, but this is especially true in Forex. When you are dealing with nations, there is an unconscious labeling of the currency—almost a personification of the individual monetary units. Traders must be very careful not to bring this baggage into the markets. An example is the trading of the euro versus the U.S. dollar. In 2003, traders with a bias toward the U.S. dollar, who believed that the U.S. dollar should always be priced above the lowly euro, lost money quickly, selling euros and buying dollars as the euro continually strengthened.

A trader must view each currency as a trading vehicle and nothing more or less. Some people think selling the U.S. dollar weakens the U.S. This attitude, however, displays a profound ignorance of some basic macroeconomic theories.


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