Have you ever heard of the ‘herd mentality' syndrome? To put it in easy terms, it means that when enough people appear to be doing a certain thing, more people jump onto the bandwagon to get in on it.
If you think about it, you'll realize that you've probably encountered this before in many avenues. It is the way fads are born, and is the reason that absolutely everyone feels like they really must have that latest amazing gadget, or designer handbag, and so on.
Unfortunately, when it comes to currency trading, herd mentality can really break your investments.
Sure, there is safety in numbers, and if a lot of people are selling a currency, there probably is a good reason why they’re doing so. ‘Going against the grain’ doesn’t mean that you should stay on a sinking ship even though it is obvious that you’re going to make a huge loss.
Think of it this way: When everyone is selling a certain currency, and its price is dropping tremendously, eventually it is going to taper out and rise again. As it goes lower and lower, the chances it gradually stagnating and then rising increase dramatically.
Similarly, if a currency is going higher and higher, chances are it will eventually taper off and drop steeply too!
Being able to identify these points, and get on board at the right time, while going against the grain, is what you need to start to do.
Let’s just say the buying Euros is approaching 1.2 US$ per Euro, which is the lowest that it has ever been in, for example, 10 years. Chances are it isn’t going to drop much further than that, but while everyone is busy abandoning the Euro, you can buy in at an amazingly low price.
Sure, it might drop a little more, but eventually it is bound to pick up again, and as it does you’ll be right there to sell off your Euros and profit. Naturally the key here is to not let it rise, and rise, and then fall again. Pick your sale time carefully!
Currency trading in this fashion really is the key to making vast profits. Savvy traders spend their time pouring over financial graphs to determine the points where a currency isn’t likely to go any higher, or isn’t likely to go any lower, and then forming decisions based on them.
Needless to say, it is risky – but then again, all the most profitable ventures are!
End of the day, if you truly want to profit from forex, you’re only going to be able to do so by being independent, thinking for yourself, and going against the grain wisely. If you can accomplish this, then you’ll find that you’re well on your way to being an expert investor.