This article looks at the rational ignorance that currency trading employs.

When you look at currency trading you may feel that there is no such thing as ration ignorance.  However, ignorance is considered to be rational when the costs of finding out the information exceed the benefits that you will receive from the information.  The problem is that not all currency trading is done using rational ignorance.  You need to determine whether or not you are using ration ignorance or not in your currency trading.

What Types of Ignorance Are There?

If you are not using rational ignorance in your currency trading then you have to consider what you are using.  There are two types of ignorance that you have to know about on the forex market.  The first is inevitable ignorance and the second is induced ignorance.  Neither of these are considered to be rational ignorance because of the manner in which they work.

What is Inevitable Currency Trading Ignorance

When you trade on the forex market there is only so much information that you can know.  There are no traders who can honestly state that they know everything about the forex market.  The information that you do not know is considered to be inevitable ignorance.

The only times when inevitable ignorance is considered to be rational is when the information you are ignoring does not impact your trading.  The level of inevitable ignorance will vary depending on the amount of time you have to put into your trading.  The higher the amount of time you have to trade the more information you are going to know about.

What is Induced Ignorance?

Induced ignorance is the most dangerous type of ignorance that you could be trading with.  When you use this you are going to wilfully ignore information that you should be looking at.  This could be information that you can easily obtain and need to have or information that you cannot easily obtain.

When you trade with induced ignorance you are opening yourself to problems on the market.  Traders who use this are more likely to fall for forex scams and to lose money on the market.  It is important that you try and avoid this type of ignorance at all times.

Don’t Fall into Information Overload

There is a very fine line between having the information that you need and falling into information overload.  Information overload comes when you try and gain too much information about your trading.  When you hit information overloads you will not be able to trade correctly.  With information overload you will not be able to determine what information you need to use to trade with.  This will lead to under trading and the making of bad trading decisions.

Getting the Information You Need

Currency trading can only be completed successfully if you have to information that you need.  The first step in doing this is to determine what information you need to trade with.  To do this you have to understand what you are going to be trading and how you are going to trade.  This allows you to filter all the information to find only what you need.