A Business Lesson From Chess: Plan Ahead In Forex Trading

A Business Lesson From Chess: Plan Ahead In Forex Trading

You must have heard it many times, how almost everything has been compared to chess. Allusions have ranged from the most common – traditional sports, such as basketball games, tennis matches, and boxing bouts, for example – to the more unconventional subjects, such as politics and marketing strategies. The metaphor is used usually when two competing sides try to outwit each other in their common sport or trade. This time, let’s use chess, particularly one of its most important lessons, in forex trading.

Plan Ahead

In chess games, especially those with time allotments, planning ahead is a must. Players are given a particular amount of time, say, 30 minutes each, to play the game (a total of one hour for the entire game). A player’s clock runs down until he or she makes a move, in which case it gets paused, and it is the opponent’s clock’s turn to trickle down. If a player runs out of time, he or she loses. Therefore, the player must, as much as possible, spend his or her time planning his or her moves at the cost of his or her opponent’s time.

Just the same, it is important to plan ahead in forex trading. Knowing what currencies to buy and/or sell, and when to do so, are matters that have to be decided upon beforehand, and should not, as much as possible, be done instinctively. The trader should use clues, news and graphs to help him or her in deciding. He or she must prepare for the developments early on, lest it will be already too late to act.

How To Plan Ahead?

Planning ahead is playing with logic. It uses the simplest syntax of logic, the If-Then statement. Simply come up with as many If-Then statements as you can, store them, and keep them in hand.

In chess, you say, “If he moves his Knight to F3, then I will move my pawn to C5; if he moves his Queen to E2, then I will move my Knight to F6; and so on.”

Or it could be as simple as you reading about your favorite subject, say, Mythology, and keeping note of what you think could be trivia questions in a TV quiz show, like the names of the Fates or the twelve labors of Hercules. You want to make sure they’re in your subconscious just in case you get to play for a million dollars and the question happens to be that.

Or it’s like you playing your favorite computer game, thinking: “If Super Dragon gets buffed by 3 health points in the next update, then he’ll be the strongest character in the entire game and I will pick him then. For now though, I’ll always choose Major Dragon.” Or something to that effect.

Planning ahead is about preparing for, and foreseeing what’s about to come.

How To Plan Ahead In Forex Trading?

First, you should be aware of the present status of the international markets and the socio-political climates of the different countries. You should take note of the promising or threatening conditions, in their realistic context, as well as their numerical equivalents – for example, what the Brexit means in terms of GDP or trade ratios across the world, etc. Once things are spelled in numbers, formulate your If-Then statements, such as, “If USD:AUD becomes X:Y, then I will buy N USD.” To reach your Then statements, you have to compute beforehand, considering the different relevant variables, including transaction costs.

Why Plan Ahead In Forex Trading?

The best decisions are always those that are well-planned. This is because, from mathematical, statistical and logical standpoints, well-planned decisions give the highest chances of getting the desired result.

Planning ahead allows you to execute your plans immediately, saves time, and makes the most of the opportunities you’ll get. By planning ahead, you put yourself in a position to get the most gains or suffer the least losses in forex trading.