Economics and Currency Trading
Economics and Currency Trading
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Home Page > Finance > Currency Trading > Economics and Currency Trading
Economics and Currency Trading
Posted: Feb 02, 2012 |Comments: 0
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In the mid part of the year 2007 I was involved in a serious accident. Fifty percent of my body was burned in an explosion. To make a long story short; when, in the emergency room, my mother asked me how I was feeling; I answered: “Well… If I die, please make sure they don’t charge you full price for the cremation.”
This is a true story. If you need proof send me a mail, and I´ll send back pictures of my scars.
The reason I am telling you this is because I want you to understand how a mind of an economist works. We are always looking for ways to optimize; to do the most with the resources that we have. We don’t waste anything.
Economics is the science of election (Although it is an empirical science; we do use the scientific method).That means that, because, the resources you have, no matter how big, are limited you need to make the best possible decisions when using them. When you take a decision you are leaving other options out. That other option is called opportunity cost and we need to be aware of it.
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What does this have to do with The Forex Market?
Everything!!!
When you decide to enter a position in the market, because you expect to profit, you can’t take other positions with that same capital. Hopefully the decision you took was the best one, and was the one with the most profit potential.
When your trade goes south and you incurred in a loss you should deal with it in a mature way. If you keep a trade open longer that it should; you will have to measure not only the money you are losing, but the dollars you could have made with the capital you just lost.
If you learn to think about your capital not only in terms of profit but in terms of potential profit you will make better calculations when the time to invest it comes.
You need a good system based in mechanical calculations to be able to allocate your capital in the best possible way and increase the potential profit of every trade.
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About the Author:
ABOUT THE AUTHORLuis Garcia studied economics at Universidad Iberoamericana in Mexico City and has been involved in trading since 1998. Determined to see that beginners succeed and to help discouraged traders gain back their confidence, he developed the Shortcut Forex System at http://www.shortcutforexsystem.com and http://www.howtoinvestforprofit.com.
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